In its Letter from the Editors: "The Problem with ESG" (page 3), Vinson & Elkins characterizes ESG as corporate governance redefined - or traditional corporate governance considerations "plus more" - with the "plus more" being the basis for angst and confusion given the company-specific nature of the individual components that are commonly perceived as falling under the ESG umbrella. The letter reminds us that new terminology doesn't necessarily equate to a need to create new processes, practices, policies, and systems; rather, it may simply be a matter of identifying and repackaging current practices that are already integrated into the company's day-to-day conduct.
The firm offers several sound, share-worthy recommendations for companies (public and private) to manage the ESG disclosure conundrum:
- Get as specific as possible: Identify the specific ESG elements most relevant to the company's strategy and risk profile, and table those that aren't.
- Identify what already exists: Catalog the company's current practices, programs, etc. that are commonly perceived as being encompassed within "ESG."
- Know your team: Before responding to any ESG requests, assemble the appropriate internal and external expertise.
- Create a plan: Before taking action that may be perceived as precedent-setting or create expectations of continuity or ongoing disclosure, consider next steps and future plans - i.e., be strategic about your approach.
The full Governance Update covers multiple other hot topics including pending SEC rule-making proposals, updates on board diversity and climate change reporting, risk factor disclosure tips and more.
Access additional information & resources on our Sustainability/ESG page. This post first appeared in the weekly Society Alert!