Competing ESG standards threaten to trip up even the most well-intentioned of companies.
In EMEA, companies have been facing a period of sustained activism and litigation initiated by investors and shareholders around ESG issues. To mitigate these risks, organizations must engage in robust sustainability reporting, and be prepared to back up those reports with evidence of their commitment to ESG principles.
In the U.S., ESG has mainly been the realm of environmental tort cases, but the SEC's newly announced requirements on climate change disclosures for public companies and issuers will add another layer of complexity. After the public has a chance to offer comments, we expect the SEC to finalize these disclosure rules by 2023, although requirements to comply with the rules could very well be phased in over time.
In this piece, we examine the current ESG standards and outline a framework for reducing ESG legal risks.
This was also published in Chambers Crisis & Risk Management 2022. AlixPartners was ranked in Band 1 in the category of Environmental, Social & Governance Risk.
When it comes to prioritizing ESG issues, activists, investors, and regulators are all determined to disrupt the status quo and push companies to make their operations more sustainable, equitable, and ethical. This clearly constitutes a disruption to business as usual, but companies have a choice – either to act or to react.
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