As ESG risk and opportunities become integrated into mainstream corporate operations and expectations, the legal, financial and reputational consequences of "failing to robustly engage are likewise becoming increasingly serious," according to Corrs Chambers Westgarth.
Corrs has recently released ESG: A guide for General Counsel, which maps out issues in the current context and provides a framework to assist general counsels to identify and prioritise the ESG matters facing their organisations.
Companies must meet demands for ESG accountability and transparency with proper risk management, due diligence and reporting, or risk shareholder and employee activism, investor divestment and exclusion, the report notes, but integrating ESG considerations can also be a source of opportunity, said Corrs head of business and human rights Phoebe Wynn-Pope.
"It's very easy to see the ESG framework as a risk framework, but it's also a huge opportunity," Wynn-Pope said. "For corporate counsel that are looking across the spectrum of ESG risks and opportunities, many times they'll find different aspects sit across different parts of the firm. Being able to pull it together and form a coherent narrative to communicate up to the board to help them identify strategic imperatives and inform how the ESG framework should fit within the broader organization strategy and risk management plan, really puts the general counsel in quite an important role."
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Climate Resolutions Make a Mark on the 2021 Proxy Season
The legal implications of the shift to a net zero carbon emissions future is a key consideration, which the guide explores.
"One of the things that we know, particularly following from COP, is that the environment is a big focus and how organizations are going to manage their shift from where we are now and the probably-inevitable net zero economy by 2050, Wynn-Pope said. "But what does that look like, and how do you position the business to do that in a way that might prevent/mitigate against those inevitable risks they see on the way."
Climate change is inevitably one of the top issues that come to the agenda for corporate counsels, but human rights also figures heavily into considerations for companies.
"They're universal and they're indivisible," Wynn-Pope said. "How do we think about how human rights impact in a way that's meaningful and in a way that we can really mitigate against having negative impacts along the way across supply chain, operations, and what are the questions we need to ask ourselves to make sure we're thinking about this properly."
Using a human rights lens to evaluate legal issues provides a basis for ethical decision making, and for businesses and boards to think about the impacts of their decisions, Wynn-Pope said. It is also important to take consideration of the international norms-based treaties that Australia has joined.
"This is a particular question in the human context in Australia, because we're the only OECD country without a national bill of rights," she said. "Again, you're navigating these questions with the context of business specifically.
"I think having a good view on what those international norms are, and being able to think about building those into your responses can only lead to best practice. We see that a lot in the modern slavery context, just taking a fairly non-controversial viewpoint, where, often businesses say they have supplier codes of conduct that set standards relating to pay that state they the minimum wage or the acceptable international standard, whichever is higher."