“ESG is moving fast, and we are all focused on skating to where the puck is going to be.” – Jim Kerr, Southern Company
“ESG today is not what it was yesterday. It’s not what it’s going to be tomorrow. It’s rapidly changing.” – Bill Ide, Akerman
Latitude partner, Logan Ide, recently hosted “Navigating ESG as a GC: A Roundtable Discussion” with three well-respected general counsels – Jim Kerr, Chief Legal Officer at Southern Company; Ray Manista, Chief Legal Officer at Northwestern Mutual; and Vanessa Allen Sutherland, Chief Legal Officer at Norfolk Southern Corporation.
William (“Bill”) Ide joined us as moderator. Bill is a Partner at Akerman LLP as well as Co-Chairman of The Conference Board ESG Center Advisory Board. He is also the former General Counsel of the Monsanto Company and former President of the American Bar Association.
The panel had a wide-ranging discussion that illuminated the bigger picture of what leading companies are doing in the ESG space and drilled down into the general counsel role.
ESG as Business Imperative
Those of us outside of larger legal departments and investment management companies may not appreciate the magnitude and growing pace of ESG activities within leading companies. Jim Kerr provided the starkest example, describing how in the past five years Southern Company has made the determination that the company’s ability to attract capital and to manage its business is inherently tied to how they respond to climate change concerns. As a result, they have embraced a “carbon net neutral by 2050” business plan and redefined an existential challenge as a growth opportunity.
Bill Ide pointed out – with agreement all around – that, regardless of whether they are large greenhouse gas emitters, all businesses will be held to account by their stakeholders on their response to climate change and their activities in (S)ocial and (G)overnance areas, as well. Ray Manista backed this up by describing how – even as a private financial company – Northwestern Mutual has become very intentional about their environmental footprint, development of their human capital, and their impact on the communities in which they operate.
Vanessa Sutherland made clear that a wide variety of stakeholders, including investors, customers, employees, governmental agencies, and the communities in which they operate, are all engaging with Norfolk Southern on its ESG efforts and that being pro-active in activity and communication is the only real option for successful navigation of ESG.
Relevance and Role of the General Counsel
Vanessa stated that “ESG is a good opportunity for the general counsel to contribute and provide leadership based on their experience with governance and enterprise risk management.” Ray added that the GC is “uniquely positioned to herd the cats…based on a job that is fundamentally connecting dots across the enterprise.”
This enterprise coordination may include working with the board, internal audit, investor relations, compliance, finance, environmental, and M&A, among others. Jim shared that driving vertical coordination has become a new priority, ensuring that operating units are integrated with the goals and communications priorities of the enterprise.
The group agreed that the GC increasingly has a role in coordinating, validating, and participating in dialogue with internal and external stakeholders, including “relentless shareholder outreach” as described by Jim. In particular, the legal department must lead in ensuring that communications across the enterprise are accurate, consistent, and in line with company goals and regulatory constraints.
The panel was unanimous in believing that the pace of ESG action, disclosure, and communication – and demands on legal departments – will only increase. Government regulation (SEC and otherwise) will play a role, but the momentum is primarily being driven by investors, customers (consumers and business), and employees.
One of the greatest challenges is in determining what information to disclose and report and how to do so. Ideally, investors (led by BlackRock and State Street in the U.S.), regulators (S.E.C.), and industry groups will be successful in consolidating and standardizing disclosure regimes. Jim described work being done internally and with consultants to try and be ahead of the curve in generating “investment grade, non-financial data” to satisfy coming regulation, investors and to minimize exposure to lawsuits alleging inaccurate disclosure.
Noting the current results of the 2021 Edelman Trust Barometer that put business as significantly more trusted than government or the media – as well as the highly polarized state of politics in the U.S., Bill asked what the role of the corporate enterprise should be. The panel shared that their enterprises view their roles as serving their shareholders and other stakeholders. That means building long-term enterprise value, mitigating risk, attracting and retaining employees, and being responsive to customers. When approaching challenging social and quasi-political issues, they lean into their established corporate values and try to ensure consistency in talk and action – “our audio must match our video.”
Listen to the entire discussion on demand. This program is approved for CLE credit in Georgia, Tennessee and Wisconsin. A Certificate of Attendance will be provided to Wisconsin attendees and those seeking credit in other states.