ESG as a legal superpower: Legal departments are becoming the driving force

This summer, the In-House With You team at HCR Law is ‘walking on legal sunshine’ with Hot Tips for Cool Counsel, a seven-part article series created especially for in-house lawyers. Whether you’re planning ahead or tackling new challenges, these summer legal essentials offer a seasonal refresh with practical tips and insights, to help you stay sharp, compliant, and confident, whatever the summer brings.

In our final in the series, Tracy Lake, Partner in the Commercial Team, looks at how legal teams can lead the way on sustainability, governance, and ethical leadership, beyond just compliance, and offers top tips for creating impactful ESG strategies.

What is ESG – in a nutshell?

Environmental, Social and Governance (ESG) refers to a framework used to assess a company’s broader impact on the environment and society, as well as its internal governance practices.

This framework is increasingly influential in evaluating corporate sustainability, ethical conduct, and transparency. The sustainability and ethical impact of a company or investment is an important factor that investors will consider when investing in a business.

Research also shows that good ESG practices will not only help to attract and retain staff, (particularly younger employees, a generation that places high value on environmental and sustainability issues) but will also appeal to customers and suppliers of a business. For in-house counsel, ESG is not only a reputational or compliance matter; it also represents a growing area of legal risk and regulatory scrutiny.

Institutional investors and stakeholders now routinely factor ESG metrics into their decision-making processes. Sound ESG performance can also drive talent acquisition and retention, particularly among younger demographics who prioritise sustainability and enhance relationships with customers and supply chain partners. As such, ESG considerations are becoming integral to enterprise risk management and long-term strategic planning, areas where in-house legal teams play a critical role.

Why ESG matters to in-house lawyers

As trusted advisors and strategic partners, in-house lawyers are uniquely positioned to influence and shape how ESG considerations are integrated into business operations. Their roles enable them to have clear oversight of what’s happening across the business. With visibility across functions, legal teams often have a comprehensive understanding of enterprise-wide risks, regulatory obligations, and stakeholder expectations.

ESG is increasingly linked to long-term business performance, resilience, and reputational strength.  In-house lawyers will recognise that ESG is an important component for business growth and can have a direct impact on the business’ success and bottom line. From managing legal and compliance risks to supporting disclosures, contracts, and supply chain due diligence, in-house counsel can add significant value by proactively engaging with ESG issues. Understanding the ESG landscape enables legal teams to align business practices with evolving legal requirements, investor expectations, and societal standards, ultimately contributing to sustainable growth and protecting the company’s bottom line.

Key ESG considerations for in-house lawyers

In-house counsel plays a critical role in envisioning and embedding ESG into the fabric of a company’s long-term strategy and operational decision-making. As stewards of legal risk and corporate integrity, they should approach ESG not just as a compliance obligation, but as a driver of sustainable value creation. When advising on or overseeing ESG-related initiatives, the following practical considerations are particularly relevant:

• Collaborate and communicate – Work with colleagues to understand the business’ priorities and objectives on ESG. In-house lawyers are in the unique position of having access to all areas of the business, use this to communicate the business’ ESG strategy
• Comply – Ensure that the business is complying with all mandatory laws and regulations (e.g. employment law, data use and security, energy regulatory law)
• Educate and empower – Educate the Board and senior leadership team on why ESG is so important (a cost-benefit analysis may be useful) and empower stakeholders to use that newly-acquired knowledge to create a strategy to move forward
• Identify and influence – An in-house lawyer’s legal and commercial knowledge can be used to identify the law and practical steps needed to address ESG issues and to influence key stakeholders in the business
• Manage and mediate – Manage expectations about what is both necessary and achievable – stakeholders will no doubt have different views on the importance of ESG and the lawyer’s skills in mediation to address any differences will be put to good use
• Prioritise and protect – It will be important to advise the business to prioritise ESG issues (the strategy will not be achieved overnight) whilst working through the priorities, so that the business is protected against claims for non-compliance of mandatory law and regulation
• Lead and think positively – As someone with a bird’s eye view of the business, the in-house lawyer can take a lead on strategy for ESG and assist in addressing the issues in a positive way. The business will therefore not only be compliant with the law but will also benefit in other ways (e.g. financially and in staff recruitment and retention, as referred to above).

How can HCR help with ESG?

The in-house team may wish to consider external support to fully implement ESG, ensuring that the law is complied with, and that the legal team is assisting the business and adding value by creating innovative ideas for the business to achieve its goals within a complex landscape.

The team at HCR Legal has expertise in all areas of ESG and can assist in-house lawyers to progress ESG matters. Please contact Tracy Lake if you would like to know more.

To read more in the ‘Hot Tips for Cool Counsel’ series click here.