ESG trends: what clients need to know

Partner and ESG Co-Lead Julian Hammond discusses the latest trends in ESG (environmental, social and governance), which is transitioning from an aspirational goal to concrete principles. He outlines three key areas – legislative developments, regulatory response and company culture – where clients could be exposed to risks, regardless of company size, and how those risks can be mitigated.

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[Julian Hammond:] 

This year, in 2023, what we have seen is the transition from the amorphous and the aspirational through to reality and concrete principles. And what that really means is the principles of sustainability are finally meeting the requirements of governance, for both large and for small companies. We've really seen that happen across three key areas, being legislative developments, regulatory response and then more broadly at the level of company culture and ethics and integrity, and we think those are the key areas where clients are exposed to risk and should be aware of the various changes that have happened over the last 12 months.

There is a significant piece of work being done on the legislative end to create a legislative environment which will require further disclosure and further attention to legislation by companies, both large and small.

On the regulatory response end, what we've really seen is that transition from the amorphous and the aspirational to reality means that regulators are now using existing laws – for example, misleading and deceptive conduct – to ensure that companies are compliant and not just making aspirational statements, that what they are saying is something which is defensible and has evidence base, both for consumers and investors moving forward.

The third area for clients to be really concerned about and interested in, is at that broader level whether that's the boardroom for a larger company or indeed company culture generally for a smaller company. This is about integrity and ethics, and that can touch on areas such as, modern slavery, data protection, but it can really come down to the ethics and integrity, when it comes down to corruption, bribery and ethical conduct.

For clients, the key issue here is regardless of the size of your company you may have quarantined issues of sustainability principles with a certain individual or team. Those issues should now be, if you're a large company, at the forefront of the boardroom and you need capability and understanding of sustainability principles in the boardroom, in addition to understanding those Government governance requirements as well.

For a smaller company, you need to ensure that the left hand is talking to the right hand in some ways and that you have those sustainability principles being socialised throughout your company so that everyone is aware of what is happening and that you aren't exposed to conduct risk and deceptive conduct risk, through regulators, through making statements that do tend towards the aspirational and amorphous, and aren't backed by reality or by evidence on the ground.

So, the key issue here is you can no longer quarantine these ESG principles with an individual or a team, they need to be socialised throughout your organisation, regardless of size, so that everyone is aware of what is happening in this space and that there is sufficient governance principles in place to ensure that you are not exposed to enforcement risk by regulators.



Julian Hammond

Julian is a commercial disputes lawyer, with specialist expertise in the use and misuse of regulatory powers.

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