Survey: Legal heavily involved in ESG strategy, less so in compliance

The joint survey by law firm Morrison Foerster and publisher Corporate Counsel polled 79 global, in-house counsel regarding legal department involvement in ESG policies, which have become increasingly important to stakeholders and investors. Respondents included general counsel, chief legal officers, and vice presidents of legal at companies whose departments consisted of one to more than 60 attorneys.

The survey, conducted via telephone and online from Jan. 26 to March 11, showed legal departments take a lead role in crafting ESG strategy but not in measuring compliance with related goals, according to a report on the results.

Only 18 percent of respondents said their legal departments were “extremely involved” in ESG compliance, while 54 percent reported being “extremely involved” in designing ESG policies.

About 75 percent of respondents reported their legal departments as being moderately involved in ESG compliance, while 6 percent said they had little to no involvement with compliance at all.

“Once you kind of build out your compliance program, what you really have left is the monitoring and the tracking, and that can often be handled by your audit function or your finance function,” said Ling-Ling Nie, deputy general counsel, chief compliance officer, and chief ESG officer at Boston-based information identity security startup Aura, in the report.

The results might reflect “really evolved companies that are focused on ESG pretty much have their compliance program locked down,” said Nie. Compliance might be moved to a stage where it consists of “just the monitoring and tracking,” and “other units can take the reins from there,” she said.

Only one in five of the legal departments surveyed said their companies relied on a compliance officer for monitoring and tracking progress toward ESG objectives.

Etsy, the online marketplace for handmade and vintage goods, uses in-house and external auditors and other compliance experts to track progress toward ESG goals, said Jill Simeone, chief legal officer and corporate secretary at Etsy, in the report. Etsy publishes its ESG targets and how well it achieved them in its Form 10-K it files with the Securities and Exchange Commission, Simeone said.

More than half (54 percent) of survey respondents said their company’s corporate executive compensation includes incentives or mandates for achieving ESG objectives.

“As shareholders increasingly look for sustainable value creation, it makes sense to link compensation to achieving specific, measurable ESG targets,” Mark Maurice-Jones, general counsel and compliance officer for Nestlé, said in the report. “It is important, however, to ensure that the targets are authentic and meaningful to avoid greenwashing. Having meaningless targets is almost worse than having no targets at all.”

Legal departments reported they were most focused on governance policies, followed by social issues and environmental. The survey authors hypothesized legal departments ranked environmental goals as their lowest priority in part to general “confusion around measuring and reporting achievements” with environmental goals.