A Step-by-Step Guide to Starting an ESG Program for General Counsel

You are committed. You set the objective of building an ESG program. Great decision! More than 50% of general counsel list ESG as a top 5 risk for their company, and regulations are starting to shift ESG from voluntary to mandatory. But, where do you start?

ESG is a rapidly evolving area. We didn’t learn about this in law school. There aren’t very many CLEs on the subject. And even if found a course, it probably would not cover the practical steps to moving the ball forward on ESG in an organization.

Not to worry. I have you covered. This guide will walk you through the process of building an ESG program step-by-step.

Step 1: Build Executive Buy-in

Launching an ESG program necessitates commitment from the top. Build an ESG business case that identifies the benefits of acting now. These could include regulatory compliance, cost savings, competitive positioning, brand, and talent recruitment and retention. You can find more on building a business case in this post.  

Step 2: Establish Governance

ESG is becoming a material risk for companies. Investors expect this risk to be managed appropriately. Train your board and executive team on ESG so that they will be equipped to make decisions and discuss ESG risks with stakeholders. Ensure that both your board and executive team have at least one person with substantial ESG knowledge and allocate leadership roles and responsibilities. Decide whether ESG risks will be overseen by the full board or a subcommittee and establish reporting routines to support this oversight.

Step 3: Start a Cross-functional ESG Team (e.g. taskforce, committee)

ESG touches every part of a company. Therefore, it's crucial to build a cross-functional team responsible for integrating ESG into your company’s operations. Include senior representatives from sustainability, finance, legal/compliance, risk, strategy, sales, operations, and human resources. Leverage this team to identify the ESG work that is already being done across the company, pinpoint ESG pain points in their departments, and highlight opportunities the company could capture by improving its ESG performance.

Step 4: Add Outside Strategic Expertise

ESG programs require a broad range of expertise. The types of expertise vary depending on geography, industry, size, and business model. You will likely need outside help to measure your carbon footprint. Other types of expertise you may need include regulatory compliance, supply chain, carbon reduction, and technology.

Step 5: Collect ESG Data

Transparent reporting on ESG is expected by regulators, investors, and clients. This requires data from across the organization. The most challenging and most important data to gather will be your carbon emissions, including direct emissions from your operations, indirect emissions from the use of energy at all your locations, and indirect emissions from your suppliers and products. Start the data collection process as early as possible.

Step 6: Take Action

ESG requires a lot of planning, meetings, policies, and reporting. With all of this, it can be easy to forget that the most important part of any ESG program is taking action to improve your performance on material issues. Choose no more than three actions and focus your efforts on those areas. Top focus areas to consider are carbon reduction, biodiversity, and DEI.

Step 7: Align on KPIs and Reporting

There are many ESG reporting frameworks. You will need to select at least one, possibly more. Start by determining whether the EU Corporate Sustainability Reporting Directive is likely to apply to your company. Consider any reporting requests that you have received from investors and clients. Major frameworks include the Global Reporting Initiative (GRI), Carbon Disclosure Project (CDP), UN Global Compact, and the recently released IFRS Sustainability Disclosure Standards.

Step 8: Plan for Improvement

ESG is not a one-time project. It is a mindset that must be integrated into the company's daily operations. As you are designing the program, ask yourself whether you are building ESG processes that can and will continue even if the individuals involved change, whether you will be able to collect data the same way next year, and whether your reporting will capture improvements year over year.

Implementing an ESG program is a strategic imperative amidst shifting regulatory landscapes and increasing risk awareness. Executive commitment, robust governance, and cross-functional collaboration are all critical to success, as is taking tangible action in prioritized areas like carbon reduction. You have the tools you need to tackle this challenge. The most important thing is to start. Small steps over time lead to big results.