Login to MyACC
ACC Members

Not a Member?

The Association of Corporate Counsel (ACC) is the world's largest organization serving the professional and business interests of attorneys who practice in the legal departments of corporations, associations, nonprofits and other private-sector organizations around the globe.

Join ACC

Key Takeaways:
- Create a dedicated ESG team within your organization and mobilize leadership to advance and report on your company’s ESG goals.
- Develop and implement a plan that is clearly communicated within and through your organization. 
- Be prepared to disclose your company’s findings publicly.
- Draft a Corporate Sustainability Report that leverages available standards, incorporates qualitative and quantitative feedback from key stakeholders, and matches your company’s initiatives and goals.
- This is an evolving field: continually monitor federal and state requirements for changes or updates to existing law and practices.

While the focus on Environmental, Social and Governance (ESG) issues is not new, the importance of reporting and treating ESG as a key component of your business and governance processes has increased in recent years. 

The Global Report Index (GRI) stemmed from public outcry in 1997 over the environmental damage caused by the Exxon Valdez oil spill. Disclosure standards and ratings organizations like the Sustainability Accounting Standards Board (SASB), Institutional Shareholder Services (ISS), MSCI and others, were subsequently dedicated to ESG. Industry associations have since stepped in to support their members with ESG-related resources, information sharing, and advocacy. 

The shift is driven by ESG-minded investors who are demanding that their money be invested in ESG-minded companies and funds. For example, in January 2021, the latest annual “Fink Letter” published by Larry Fink, Chairman and Chief Executive Officer (CEO) of BlackRock, put ESG, climate change and diversity, equity, and inclusion (DEI) at the forefront. BlackRock calls for a global uniform ESG disclosure standard and, in the interim, endorses reporting under SASB and the framework provided by the Task Force on Climate-related Financial Disclosures (TCFD). 

The Fink Letter specifically asks public companies to provide climate-related risk disclosures regarding the incorporation of climate risk as part of board oversight and strategy, and to include a discussion of long-term DEI strategies in company sustainability reports. BlackRock cautions companies and boards that they may vote against directors where disclosures are “insufficient to make a thorough assessment”, or where a “company is not adequately addressing climate risk.”

A rise in institutional investor demands coupled with the lack of a global uniform ESG disclosure standard means that it will be incumbent upon you and your company to determine what to disclose publicly and under what standards to report the information. This article will identify what ESG means from an in-house counsel perspective and steps for developing your company’s ESG program. 

1.    Top-Down Leadership – Governance and Executive Management

A successful ESG program needs structure, oversight, and leadership. The promotion of sound governance practices starts at the board level. The days when the focus was mainly on the “independence” of board members are over. Today, most stakeholders expect that the makeup of the board will include directors with diverse experiences and backgrounds. Investors and, to an increasing extent, regulators, expect boards to be racially and ethnically diverse, and gender diversity is a priority. As recently as December 2020, NASDAQ proposed a rule to the United States Securities and Exchange Commission (SEC), with the goals of advancing board diversity and enhancing transparency of diversity statistics through new proposed listing requirements. 

This new rule, if approved by the SEC, would require certain NASDAQ-listed companies to disclose annual diversity statistics regarding their directors’ voluntary self-identified characteristics and to include on their boards at least two diverse directors (as defined under the rules), or to disclose publicly why their boards do not, in fact, include diverse directors. In addition to the emphasis on diversity, strong ties to the communities in which the company operates are encouraged as well. 

As the focus on ESG increases and evolves, the board must take an active role in oversight of ESG either directly or through its committees. In particular, the board should consider both risks and opportunities relating to ESG. A company’s nominating and governance committee is often in the best position to make recommendations to the board on these matters given the leading role “governance” plays in ESG. However, compensation committees and audit committees will be key as well. The compensation committee is responsible for oversight of human resources – the human capital side of ESG – and the audit committee is responsible for oversight of the financial reporting and compliance process.

It will be necessary for executive management to plan, implement and lead your company’s ESG strategy forward. This will require that employees be dedicated, in whole or in part, to your ESG program (your ESG Team). Your ESG Team members will need to work within their areas of expertise and cross-functionally across the business, in order to plan and implement your company’s ESG strategy, as well as accurately collect and report ESG data. 

It is critical that your ESG Team has the support of executive management, which is why companies have created offices and divisions dedicated to ESG that are led by senior company leaders and report to the highest level of executive management. Companies assign responsibility for ESG to various executive officers, and many have established a dedicated executive position, “Chief Sustainability Officer,” for this purpose. Irrespective of who is responsible for ESG at your company, a key component to a successful ESG program is leadership and, with it, buy-in at the highest levels of the organization.

2.    Engagement

With a sound governance structure in place and clear direction from the board and executive management on ESG, your ESG Team should be able to move the ESG program forward from inception to implementation. As discussed below, numerous organizations provide scores and assessments of a public company’s disclosure on ESG using a combination of established reporting frameworks and standards, as well as their own proprietary methods. They are commonly referred to as “raters and rankers.” The scores that these raters and rankers assign to your company are based largely on your public disclosures, and will serve as a starting point to assess how investors view your company’s ESG efforts. 

Many companies also receive feedback from their investors during regular investor relations activities. Using this feedback, as well as the scores from the raters and rankers, will help you initially assess how your company compares to its peers and how much capital needs to be invested to achieve your company’s ESG goals. This is an area where your company’s ESG experts – cross-functional teams including accounting, environmental, engineering, finance, human resources, operational and legal departments – can provide value. 

Your ESG Team should also engage regularly with external advisors and stakeholders with knowledge in these fields. These habitual engagements will help your ESG experts identify issues, test theories and ideas, understand the evolving ESG landscape, become better business partners to your company, and effectively liaise with external stakeholders. 

3.    ESG Reporting, Data Aggregation and Assessments

The ESG reporting frameworks and standards, listed below, will serve as a starting point for forming communications to the public regarding your company’s ESG practices and performance. Many companies now provide a stand-alone Corporate Sustainability Report that sets forth the company’s sustainability strategy and leading practices, while attempting to satisfy the expectations of the audience, which includes its investors. A small number of companies also provide a report that is integrated with the company’s annual financial reports. Given that there is no uniform ESG disclosure framework or standard, your company can consider reporting its ESG practices and performance under the following: 

Data aggregators such as: CDP, Dow Jones Sustainability Indices, Bloomberg and Refinitiv collect privately- and publicly- available data to measure and understand a company’s ESG impact for investors and other stakeholders. The analytics created by the aggregators are used for informing ESG investments, portfolios, corporate strategies and risk management, among other purposes (depending on the stakeholder). 

Other financial research institutions and raters and rankers – such as MCSI, ISS, FTSE4Good, Sustainalytics, a Morningstar company, Vigeo.Eiris, a Moody’s company and the S&P Global Corporate Sustainability Assessment – provide guidelines in their methodology that factor into ESG scoring and assessments. MSCI and ISS ESG are the most commonly relied-upon assessors; ISS more so because of its influence over public companies as the leading proxy advisory firm. A “vote” or “no-vote” recommendation by ISS can positively or negatively impact a company’s proxy proposal by twenty-to-thirty percent. This can make the difference between an approved or rejected proxy proposal. ISS and Glass Lewis & Co., the other major proxy advisory firm, increasingly have leveraged ESG factors into their voting policies in recent years. It is important to gain at least a broad understanding of these leading frameworks and rater-and-ranker methodology to begin to form your communications strategy.

4.    Institutional Investors and Shareholder Activism

Institutional investors and asset management firms like BlackRock, T. Rowe Price, Vanguard and State Street have their own ESG voting policies. These firms expect greater emphasis on, and disclosure of, ESG and sustainability practices – specifically, climate change risk disclosure, DEI, human capital management and compensation practices. To the extent a company’s ESG and sustainability practices are not satisfactory to them, firms like BlackRock may hold board members and nominating and corporate governance committee members accountable by voting against their elections at their company’s annual shareholders meetings.

The most salient focus area for climate-change advocates comes from the recommendations of the TCFD: under the framework companies are expected to explain how their initiatives align with the goals of limiting global warming to “well below” two degrees Celsius and reaching net zero greenhouse gas (GHG) emissions by 2050. The TCFD framework calls for climate-specific disclosures across four reporting pillars: governance; strategy; risk management; and metrics and targets. 

Additionally, leading investors now expect companies to disclose information on workforce demographics like gender, race, ethnicity and advancements in DEI – all typically required to be filed with the United States Equal Opportunity Commission’s EEO-1 data collection survey. Accompanying the demand for these disclosures is the threat of votes against board members, specifically committee chairs, in the absence of what investors deem to be adequate disclosure according to their voting policies. 

Shareholder activism has also played a role in promoting ESG and sustainability practices. Activists have filed suit against companies seeking to change their practices and/or to affect their reputation and business. Moreover, shareholder activists continue to launch ESG- and sustainability- focused proxy battles and submit related proposals at shareholder meetings. In the new age of ESG and sustainability, investors have shown an increased level of support for climate-related, board diversity and political activity proposals, which in prior years were overlooked or viewed by many companies simply as nuisances.

5.    Federal Law, Regulatory Requirements and State Considerations

The SEC currently requires public companies to disclose potential risks if they are “material” to a company, and an emphasis has been placed on climate change; particularly in a company’s risk factors and management’s discussion and analysis of financial condition and results of operations. 

In 2020, the SEC adopted rules for human capital management disclosure, using a principles-based approach to disclosure among a set of 12 topics that must be disclosed if material to a company’s human capital resources. These topics cover human capital-related resources, measures and objectives that a company considers when managing its business.

In furtherance of these ESG initiatives, the SEC responded to increasing investor and political demand by evaluating its regulations on climate change disclosures. In a public statement in March 2021, then-Acting Chair Allison Herren Lee welcomed input on climate change disclosures. The SEC is seeking public input, through a series of 15 questions on the SEC’s regulations; disclosure rules and guidance on climate change; ESG and compensation disclosures, as it relates to existing requirements; potential new requirements; and potential frameworks or standards to adopt. The SEC is calling for these disclosures to be submitted by June 2021, and Chairman Gary Gensler expressed the SEC’s intent to move quickly towards rulemaking thereafter.

ESG and securities law practitioners need to keep current on SEC and SASB reporting requirements as new rules are adopted. Material misstatements or omissions in ESG disclosures will be areas of focus for the SEC, shareholders and other stakeholders, and a source of potential liability for public companies and private companies who issue securities. SASB standards suggest disclosure of topics and accounting metrics covering several areas: energy management; water management; responsible drinking and marketing; packaging lifecycle management; and environmental and social impact of ingredient supply chains.

Also note that it is equally important to follow state efforts to impose ESG mandates through legislation. For example, in 2018, California passed a law that required public companies headquartered in the state to have at least one woman on the board of directors, and that number increases based on the size of the board. 

Along the same lines, in 2020, California passed another law that requires public companies headquartered in the state to have at least one director on their board who is from an underrepresented community, defined as “an individual who self‑identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self‑identifies as gay, lesbian, bisexual, or transgender,” and the number of directors required to meet this criteria increases depending on the size of the board.

6.    A Quantitative and Qualitative Understanding of Your Company’s Business

With myriad disclosure frameworks and standards, laws and regulations, and stakeholder expectations, the more you know about your company and its business, the more value you can bring to your company’s assessment and implementation of an ESG framework. 

The ESG frameworks or standards that you follow provide a roadmap for improving ESG scores from raters and rankers, and the topics cover several practice areas and disciplines. It is crucial that all members of your ESG Team are engaged and working cross-functionally with internal and external experts and business units in the strategy, planning and reporting process. 

Some inquiries will be answered most effectively by employees with specialized expertise and/or a deep knowledge of the business area. It is also necessary to understand which standards do not apply to your company, which standards are easily achievable for your company, and which standards will require significant investment to achieve. The practices rewarded by the raters and rankers may not always be relevant to your company. The key is to clearly communicate and report your company’s ESG and sustainability mission and find the intersection of your company’s sustainability strategy and the practices that your stakeholders favor.

A useful place to start (or restart) is with materiality, data management and reporting process assessments. This can be done internally by your ESG Team or externally by an ESG consultant. A materiality assessment can be used to determine your company’s most material ESG and sustainability impacts, risks and growth areas. Materiality goes beyond quantitative metrics and should include a qualitative assessment using facts and circumstances relevant to your company’s operations. A data management assessment can be used to identify and measure the quality of governance and data collection processes, compliance and internal controls. A reporting process assessment can be used to evaluate your company’s specific disclosures in response to the framework or standard selected. 

Together these assessments should highlight areas of improvement for your company’s ESG and sustainability initiatives, data management and analytics, and quality of reporting. The assessments can also be used to benchmark your company’s ESG and sustainability practices against peers in your company’s industry.


The practice of ESG and sustainability is in its infancy. Laws and regulations are being created daily. Mastery of this area will require that you remain current on your company’s business and industry, as well as ESG and sustainability trends and developments. Without a global uniform ESG disclosure standard, a successful program will also require engagement with disclosure standards organizations, raters and rankers, proxy advisors, and institutional investors and other shareholders. 

This engagement will be guided by your company’s existing ESG practices and how your company rates. Thereafter, strategies need to be designed, to address and disclose your company’s ESG weaknesses and developments. In-house counsel are well-positioned to provide leadership in these areas, particularly when helping to craft effective and well-supported public disclosure.

Authors: Alexander D. Gonzalez, Esq. and Richard Reich, Esq. 

Additional ACC Resources

Not an ACC member? Join Today!

Related Third-Party Websites and Resources
Global Report Index
Sustainability Accounting Standards Board
International Integrated Reporting <IR> Framework
Institutional Shareholder Services
Climate Disclosure Standards Board
Larry Fink’s 2021 Letter to CEOs
Task Force on Climate-related Financial Disclosures
BlackRock Investment Stewardship’s approach to engagement on climate risk
NASDAQ Proposed Rule to Advance Board Diversity and Enhance Transparency of Diversity Statistics through New Proposed Listing Requirements
International Accounting Standards Board
The United Nations’ Sustainable Development Goals
The UK Companies (Director’s Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018
Dow Jones Sustainability Indices
Sustainalytics, a Morningstar company
Vigeo.Eiris, a Moody’s company
S&P Global Corporate Sustainability Assessment
Glass Lewis & Co.
U.S. Equal Opportunity Commission’s EEO-1 data collection survey
Public Input Welcomed on Climate Change Disclosures
SEC’s Gensler Eyes ESG Reporting Rules After Public Input
Risk Alert, The Division of Examinations’ Review of ESG Investing, dated April 9, 2021
The International Financial Reporting Standards Foundation – Sustainability Reporting
State of California Senate Bill No. 826
State of California Assembly Bill No. 979


Region: United States
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.

This site uses cookies to store information on your computer. Some are essential to make our site work properly; others help us improve the user experience.

By using the site, you consent to the placement of these cookies. For more information, read our cookies policy and our privacy policy.