Enhancing ESG Report Development by Strategically Engaging Attorneys
Shepherding an environmental, social and governance (ESG), sustainability or impact report from conception to information gathering and writing to design is a complex process. Internal reviews by the sustainability team, internal experts, and the C-suite, are critical steps. Although reviews are built in along the way, the legal team is often not brought onboard until the final stages.
This can set the process up for trouble. The legal landscape around sustainability reporting is becoming ever more complex with new regulations, growing stakeholder expectations and increasing litigation, including over greenwashing allegations. Your in-house and external counsel have a lot to consider and to offer. There’s nothing worse than creating a beautifully crafted report and then having to rework or remove key content after the attorney’s flag problems during their review. By engaging strategically with lawyers and legal teams throughout a report development project, organizations can avoid bumps and delays down the road.
As an attorney specializing in sustainability matters, Nancy Himmelfarb knows the challenges and benefits of navigating this nexus among legal, business and sustainability concerns. On behalf of Environ, Nancy spoke with some clients to understand how best to address their pain points and make the legal review process as streamlined and effective as possible. Based on the conversations, we developed a list of best practices and resources to equip our consultants who support clients on sustainability reporting. Going forward, we will offer to help reporting clients engage their attorneys more intentionally and effectively.
8 Steps for Sustainability Teams to Engage Attorneys in ESG Reporting
Here are some recommendations on engaging your attorneys, both in-house and outside counsel, to ensure a smooth and effective sustainability report development process:
1. Educate your legal team on sustainability and disclosures.
This includes your board and executives on ESG and sustainability in general on disclosure frameworks. Also, talk with them about the objectives for sustainability reporting and the balance between legal and business considerations, including reputational risks, investor expectations and industry disclosure practices. It’s important that everyone be aligned and prepared to make decisions related to disclosures that might feel uncomfortable and to fully address potential legal exposure.
2. Involve attorneys early in ESG reporting.
Set the schedule for lawyer review and engagement as part of the project scoping and include legal counsel in the project kickoff meeting. Ensure they are briefed, and approve the methodology used to select the “material” sustainability topics to be included in the report. It’s also important that they understand and agree to definitions of key terms and concepts — in addition to what might be required of them during the review process.
3. Use benchmarking to guide disclosures and governance.
Provide attorneys with benchmarking data from peer companies to establish norms around disclosure depth, governance practices, and stakeholder expectations. This context helps legal teams evaluate risk while maintaining competitive alignment.
4. Monitor legal and regulatory risks associated with ESG reporting.
Make sure they are aware of potential legal exposure and the risk of Federal Trade Commission (FTC) enforcement actions related to sustainability disclosures. Consider developing a legal tracker or watchlist to monitor hot-button issues, such as the UK Modern Slavery Act, and to capture regional sensitivities.
5. Prioritize sustainability governance to reduce risks.
Highlight for the attorneys the difference between corporate governance and sustainability governance and brief them on best practices in ESG disclosure and emerging disclosure rules, such as the European Union’s Corporate Sustainability Reporting Directive (CSRD). Flag the risk of proxy challenges as well as challenges to the board of directors itself based on information gleaned from the sustainability report. Last but not least, discuss the need to ensure the board is engaged and that sustainability risks are vetted, which may be led by the organization’s Enterprise Risk Management team.
6. Document sources to support accuracy and review.
Keep track of information sources as you develop report content, noting which subject matter expert provided the details and what documentation they can reference. Having this backup readily available will save time and effort during the review process and help attorneys feel confident in the content.
7. Define claims to ensure compliance and avoid risk.
Collaborate with attorneys to establish clear criteria for what constitutes a claim and ensure that any claims in the report can be substantiated during the approval process. The FTC has sued businesses for making false or misleading environmental claims, and the number of greenwashing cases in the courts is growing.
8. Choose wording carefully to prevent legal issues.
Know that lawyers and attorneys consider words very carefully. They will want the report to avoid jargon and language that could trigger a challenge, such as definitive statements like “We are a sustainability leader in our industry.” They will also want to avoid inflated claims. Let your actions speak for themselves. For example, show that your company is contributing to a renewable energy future by detailing a recent project to install solar panels at your corporate office, rather than by claiming to be a green energy leader. At the onset of the reporting project, consider working with your attorneys to build a glossary of key sustainability terms and nomenclature specific to your organization or industry to align on the language within your report.
To Learn more or get help with engaging your attorneys as part of sustainability report development, contact us here. We believe it’s an important value-add, and few, if any, other sustainability consultancies offer this expertise or service.