US corporates see C-suite take on bigger role in ESG leadership, MoFo study finds

Increased regulatory demands prompts shift in ESG policy from GCs to chief compliance officers and CEOs

ESG compliance concerns are becoming a bigger boardroom issue Shutterstock

US general counsel say environmental, social and governance (ESG) concerns have evolved into a top regulatory and corporate priority as senior management take a leading role on ESG strategy and compliance, easing the burden for in-house legal teams, according to a new report from Morrison & Foerster (MoFo) and Corporate Counsel.

Chief compliance officers, CEOs and other C-suite leaders are now taking a far more prominent role in spearheading ESG strategy (72% compared to 10% last year, when GCs and in-house teams had a greater role). Even so, the majority of organisations said their legal departments still have an above-average involvement in leading ESG strategy (61%) and ESG compliance (66%).

More than three quarters of in-house counsel (78%) say their boards and leaders now have above-average focus on environmental factors, likely due to increasing regulatory mandates from global government agencies, MoFo said. Organisations increasingly tie their ESG strategies to managing risk and regulatory compliance, rising to 56% this year from just 8% in 2022. Previously ESG strategies were more closely tied to brand reputation and market competitiveness, although those factors remain significant. Two-thirds of listed companies, for example, said market competitiveness was their highest ESG motivator.

Upcoming SEC climate disclosure rules have also likely contributed to the heightened focus on ESG strategy, with the number of companies making changes to their approach to climate risk jumping to 27% from just 3% last year. Reporting to federal regulators also increased to 30% from 3% last year.

Public backlash against ESG policies has affected companies differently, with 47% of respondents reporting that they have not experienced or been impacted by anti-ESG sentiment. Another 47% said they responded by focusing their ESG efforts on more specific areas, such as climate, human rights or diversity and inclusion. As many as 15% of respondents said they no longer use the term ESG or have changed terminology to avoid any backlash from anti-ESG sentiment, a position more prevalent among large and publicly-listed organisations.

Susan Mac Cormac, global chair of MoFo’s ESG practice, said: “Our report shows that there is room for more ESG innovation beyond compliance as CEOs and C-suite executives lead ESG strategies from the top down.”

The report may be evidence that organisations are starting to make better progress on ESG strategy and compliance. A survey published last summer by Hogan Lovells found that global multinational companies were struggling to integrate ESG risk into their compliance programmes, with 82% of compliance officers concerned that ESG was not being embedded into existing risk practices.

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