In a poll conducted at Diligent's recent 'The GC's Role in ESG' webinar, 57% of respondents said that their legal department led environmental social and governance (ESG) activities at their organization. Despite that, however, over half (55%) of the poll respondents were 'not sure' or 'not confident' that their organization had a well-defined ESG governance structure in place.
That invites the question: How can GCs leverage their prime position and lead ESG initiatives at their organizations?
Diligent's Director of Product Marketing Christopher Allen discussed that topic with GCs from two very different organizations: TriNet, which handles health, compensation and insurance benefits for small- and medium-sized businesses around the world; and Scoular, a commodity and supply chain provider for food, pet food and animal feed.
TriNet Chief Legal Officer Samantha Wellington reports directly to the CEO. But her role is multifaceted and expands to include compliance, enterprise risk, regulatory and government affairs, and accountability for data management and data governance.
As Senior Vice President, General Counsel, and Corporate Secretary for Scoular, Megan Belcher's work encompasses oversight over legal, compliance, brand marketing and communications teams as well as sustainability and ESG functions for the company.
In the webinar, both shared their insights on the role of the General Counsel when it comes to ESG.
Defining ESG for Your Organization
The first step in any ESG journey is defining it: What environmental, social, and governance issues are most important for your organization and its stakeholders?
GCs are in a pivotal position to help organizations answer this question, serving in a role that Belcher describes as a 'player-coach.' In one aspect of this role, GCs act as a coach by setting the overall ESG strategy. They then feature as key players in a number of social and governance areas.
For Wellington and Belcher, the industries and exposures are different, Allen explained, but the overall mission is the same: 'Helping to level-set with the organization and with the public on what [ESG] means to them,' including the areas their companies can impact and the activities they'll undertake to show results.
To make sure their companies are tackling the right ESG issues, both Belcher and Wellington focus on what Belcher calls 'bottom-up engagement.'
TriNet's technology recycling program, for example, started when an employee recognized the issue's importance and acted on it. The organization later built a governance framework around the program to make its activities auditable, 'taking already existing grassroots efforts that sort of exist inside the company anyway and parlaying that into a reportable function,' said Wellington.
Wellington explained that TriNet, due to the nature of its business, has a strong human capital element in its ESG activities, with a significant focus on diversity, equity, and inclusion. Data security and privacy also are important due to the large amounts of employee data the company manages each day.
Scoular, with multiple divisions and 'extremely diverse customers' around the world, looks at 'not only the 'E' but also the 'S'' in terms of being a 'thoughtful leader,' said Belcher. This involves close partnerships with business unit leaders to determine ways that the company can support customers' sustainable growth as a commodities and supply chain provider.
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Operationalizing ESG Activities
As ESG forces organizations to look at things more holistically, an obvious question arises: Is ESG is a value-creating byproduct of a strong governance, risk, compliance, and audit program?
Belcher called the two 'very, very symbiotic.'
'I think the strength of your ESG program and your ability to swiftly move along that maturity journey is going to very much be contingent on where you are on your GRC journey,' Belcher said. She added that organizations can 'easily tap into strong GRC muscles that can then launch you much more quickly on the ESG side.'
Overall, she said, leading from an ESG perspective, or even leading GRC from a corporate social responsibility perspective, 'that's really leading as an organization from your values.'
Many of the metrics and governance mechanisms that make for a strong ESG program also live in a modern GRC program, Belcher said, including the technology and tools that she called the 'backbone' for effectively tracking activities and driving progress. In fact, many GCs and legal departments already have many of the building blocks necessary for getting ESG initiatives off the ground.
At TriNet, Wellington said her team is 'taking what we're already doing and turning it into a reporting framework.' To do so, they looked at the human capital management disclosures now required in proxy statements and discussed how best to include them in their 10-K.
Wellington said TriNet has drawn from the SASB framework for its own ESG reporting, but without being strictly held to its guidelines. Her team's focus has been on articulating the company's narrative in a way that is consistent with how ESG issues are being communicated in the market, alongside making sure that they're leading the way in disclosures before they become requirements.
The Critical Role of Governance
The GC, with its existing governance, risk, and compliance responsibilities, is well positioned to help build governance into an organization's ESG initiatives.
'It's the same lens. It's the same skillset,' said Wellington. 'There's a really natural connection, I think, between scenario planning and risk analysis that happens in an ERM program that the integration of an ESG program could easily be built into that planning.'
The GC 'owns' this, but 'we own it in a matrix fashion,' she said - for example, gathering reports from throughout the organization and building a structure of governance around these activities.
At a higher level, when both enterprise risk and ESG factor into an organization's strategic planning, Wellington said, ESG governance becomes 'a self-sustaining, enduring philosophy.'
Keeping the Momentum Going
Both panelists agreed that ESG initiatives can reap large benefits - deepened customer engagement, positive conversations with regulators, and a solid foundation to enter more sustainability-focused capital markets, to name a few.
But how can GCs in their evolving role keep galvanizing this momentum?
Start with these two critical questions, Belcher said:
- What does your industry and marketplace require or desire?
- What does your organization aspire to be?
- Corporate social responsibility goals
- The impact it wants to have on the communities where employees live and work
- The impact it wants to have on its industry
- What customers are looking for from an ESG perspective and how Scoular can support them as a customized solutions provider
Such 'looking around corners,' is where Belcher sees the GC role as 'uniquely situated and qualified to drive real strategic impact.'
GCs can also galvanize momentum on the operational side of ESG. For instance, said Wellington, the committee and reporting structure of a board 'really works as sort of a model to push your organization into a reporting cadence, which naturally then creates reporting metrics.'
Finally, Belcher advised that GCs cultivate a network of experts in the sustainability and governance space, to stay in touch with ESG issues, trends, and best practices. At Scoular, Belcher's team brings in third parties for independent analyses, which supplements internal data from business units.
Her advice to other GCs navigating the ESG journey: 'Stay agile and appreciate that you're operating in a still very undefined environment.'
Throughout, keep in mind how the GC's combination of roles makes this position uniquely qualified to drive strategic impact around ESG.
'This is a space where I think our skillset, our training, our leadership development, and also just that close connectivity around GRC can provide real strategic impact for the organization,' she said.
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