FiscalNote Executive Institute and Yale University co-hosted a virtual roundtable discussion, “From the Trenches: ESG Reporting Best Practices – Internal Processes and External Stakeholder Engagement” with Keir Gumbs, Jim Shaughnessy, and Michael Torrance. The discussion, part of a two-part series on ESG metrics reporting, was facilitated by FNEI Chairman Dave Curran and Dan Etsy, the Hillhouse Professor for Environmental Law and Policy at Yale University and the Co-Director of the Yale Initiative on Sustainable Finance on Oct. 7, 2020. YISF’s participation in the event was possible due to a generous grant from the ClimateWorks Foundation, and Ilmi Granoff, the Director of the Foundation’s Sustainable Finance Program, kicked off the discussion.
Corporate values, social expectations, public confidence
The discussion included behind-the-scenes insights and perspectives from in-house counsels and sustainability officers at some of the world’s largest companies. The three featured speakers began the conversation with statements about corporate values, social expectations, and public confidence. They emphasized that the challenges of ESG reporting implicate all three of these key indicators—how and what a company reports to both its shareholders and the public reflect their values, take social expectations into account, and have a direct impact on public confidence.
Internal versus external disclosures
The discussion then transitioned from these vantage points into a back-and-forth conversation between the panelists and the audience members. One of the struggles that the panelists identified was that there can be a conflict between an expressed value and what would be disclosed externally. One panelist noted that this was most difficult to balance as an in-house counsel, because they must both provide the advice and operate in the company’s internal political environment—all while taking different stakeholders into account. Another speaker mentioned that this is a challenge for lawyers generally, as they aren’t usually trained in politics and budgeting, and that they observed several highly competent private-sector lawyers facing challenges because of this obstacle.
Identifying “the right thing”
Another panelist noted that the basic starting point—“do the right thing”—was frequently arrived at in good faith. However, a definitional problem (the “right thing” with respect to whom?) and regulatory challenges both frequently clouded what “the right thing” was. The interplay and inconsistency among international and U.S. regulations, as well as divergent regulations in states and localities within the United States, resulted in obvious challenges. This panelist noted that companies were required to adopt a nuanced approach, using every tool available—or to leave the market altogether.
Where does ESG reside in companies?
An interesting question that developed from an audience question focused on where ESG functioning and reporting should reside—specifically, should there be a direct line to the CEO? While some concentrated their ESG reporting in the general counsel’s office, others noted that corporate teams that do work implicating ESG are inefficiently spread throughout their company. What was needed in those cases, one participant noted, was to have a “hub to the wheel.” Another participant noted that ESG reporting needed to be linked to the business itself to ensure that the strategies behind what the business does and what the business reports are consistent.
What does the future hold for ESG?
While much of ESG reporting has focused on the “E”—environmental—several speakers pointed out that the “S”—social—has recently come into prominence. They noted that the social aspect of ESG reporting is closely related to interpreting and understanding the full impact of the other two letters. While environmental issues are certainly serious, they should not be addressed at the expense of social and governance concerns.
As a final takeaway, one of the speakers emphasized that ESG reporting is often the “canary in the coal mine” of the next big issues that will upend corporate strategy—and that taking ESG reporting seriously means that companies can stay ahead of the curve to maintain their duties to their shareholders and their reputations.
Overall, we had a robust, compelling conversation with strong audience participation. We were honored to have attendees from a variety of different backgrounds—and with different perspectives to share!
We look forward to our next Roundtable, which is scheduled for Wednesday, October 14, at 11:30 AM ET. If you have not done so already, you can register here.
*This session was part of a two-part series on ESG metrics reporting FNEI co-hosted with Yale University. Read Session 2’s executive summary here.