It is easy to be cynical about corporate social responsibility (CSR). But the reality is that the days of CSR as “window dressing” are all but dead and gone. Today, CSR, often interchangeably referred to as “ESG, (although the definitions are often disputed) is much more about compliance, legal and business risk and business trust than it is about marketing or PR.
ESG/CSR has risen to the top of the business agenda, as companies come under increased regulatory and public pressure to focus on sustainability. Lawyers have a key role to play in helping companies implement an ESG strategy that balances stakeholder interests, regulatory obligations and soft law.
Time is running out for companies and CSR/ESG policy and practice is no longer a “nice to have”. A raft of legislation adopted in the US, EU, Australia, the UK, France and the Netherlands (and more from the EU and various states on the horizon) requires large companies to monitor and report on certain forms of human rights abuse in their supply chains and on their policy and practice with respect to environmental protection, labor practices, business ethics and diversity.
Meanwhile, so-called “voluntary” (soft law) CSR norms such as the principles of the United Nations Global Compact (UNGC) may now have hard business consequences when they are linked, in business practice, with the ever-expanding CSR and Environmental, Social and Governance (ESG) ratings industry. Today, many investors choose which companies to invest in based on ESG rankings. Companies may chose who to do business with based on CSR performance. Many consumers choose what to buy based on sustainability ratings and most employees want to work for responsible businesses.
A critical question for many companies is how to balance the socio-political pressures to be more “sustainable” or “responsible” and the many legal risks associated with blindly signing up to various international CSR/ESG norms. Many a General Counsel may ask where to even begin, faced with the plethora of sometimes competing soft law norm systems that companies are encouraged to sign up to (UNGC/ UN Guiding Principles/ OECD Multi-National Guidelines/ ISO Standards etc.). The central role for lawyers is in helping companies to navigate what is becoming a minefield of legal risk while still promoting and facilitating the highest standards of responsible business practice. This is a task that only the legal function can fully perform.
