By: Joshua Finley

Sunil Choitram Shares What Lawyers Need to Know to Guide Their Clients Through This Transition to an Esg-Centric Environment

Environmental, Social, and Governance (ESG) criteria have become essential in modern business practices. ESG provides a framework for evaluating a company’s impact on the environment, its treatment of people across its value chain, and its internal governance structures. These criteria allow investors and stakeholders to compare companies against defined standards, facilitating decisions on whether to invest based on financial returns, social responsibility, or both. As Sunil Choitram notes, “The desire to invest with ESG criteria has increased steadily over time,” leading to regulatory frameworks that standardize disclosures and motivate companies to align with national and global goals. 

While these efforts are most effective if implemented at every business level, lawyers play a particularly critical role in helping companies navigate the often complex nature of ESG regulations. According to Choitram, “If companies want to attract capital, mitigate risks, and operate within their legal and contractual obligations, they will almost certainly need to give this topic some serious consideration.” Sunil Choitram, attorney to Crescent Group, breaks down exactly what a lawyer needs to focus on when addressing the three areas of ESG regulations.

Environmental Impact Assessments (EIAs)

One of the first steps for lawyers is to determine which laws apply to a specific project. This involves a deep dive into the project’s specifics, its location, and the relevant regulations. For instance, a steel production project in France would require compliance with both French and European laws. Additionally, if the project’s emissions or waste products cross borders or if the financiers require it, international laws may also apply. Lawyers must consider the entire value chain, from raw materials to the end product, and evaluate local, national, and international regulations.

Environmental Impact Assessments (EIAs) are crucial for evaluating a project’s environmental effects. Historically, EIAs have been broadly defined but are becoming increasingly stringent and objective. For example, building a factory now requires consideration of greenhouse gas emissions, pollution, resource usage, and waste management. The scope and content of EIAs are typically mandated by law, making them a critical component of any project’s planning process.

Similarly, pollution control measures must be in place to minimize air, water, soil, noise, and other forms of pollution. Additionally, projects must consider their impact on local biodiversity and habitats. This includes managing waste products to prevent contamination of water and soil. Resource management plans should also be developed to ensure efficient use of water and energy and proper waste disposal systems.

Social Considerations and Their Effects on Local Communities

Projects can significantly impact local communities, both positively and negatively. Increased traffic, noise, and the presence of an industrial plant can affect residents’ quality of life, property values, and health. However, projects can also bring jobs and economic benefits. Lawyers must ensure that clients are aware of potential lawsuits and community concerns. Early engagement with local communities can help mitigate negative impacts and foster positive relationships.

Developers and companies alike must have proper health and safety policies to protect local residents, employees, and visitors. Legal professionals should draft, implement, and regularly update these policies to ensure compliance with relevant laws. Additionally, fair treatment of employees and local residents is crucial. This includes providing safe working conditions, respecting human rights, and ensuring compliance with employment laws.

Corporate Governance and Risk Management

Lawyers play a significant role in establishing transparent governance frameworks with clear policies and procedures. Strong corporate governance can impact a company’s ability to secure capital, valuation, and overall success. Lawyers are responsible for preparing foundational documents, ensuring compliance with financial reporting requirements, and administering anti-bribery, anti-corruption, and anti-money-laundering policies.

For many organizations, the first step in this direction starts with establishing a qualified, diverse, and well-informed board of directors. Lawyers assist in guiding the board’s roles, responsibilities, and liabilities. Additionally, risk management procedures must be in place to address various ESG risks, technical issues, security concerns, and more. Lawyers coordinate risk analyses and ensure companies have robust systems for reporting and disclosing ESG developments.

Regular reporting on ESG initiatives is crucial for transparency and compliance with legal and regulatory requirements. Lawyers ensure that companies meet reporting standards set by organizations like the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). By fostering a corporate culture focused on ESG, lawyers help companies evolve in line with modern business practices and continue to focus on implementing ESG standards around the world.

For the full article on Sunil’s thoughts on ESG and how it affects lawyers, you can visit his Linkedin.

Published by: Khy Talara