By Bassam Messaike.
I walked into Asheville Museum of Art, in North Carolina, on a recent visit and stumbled on an exhibit entitled “Altruistic Genius” showcasing the inventions and ideas of R. Buckminster Fuller. Before my visit, I had only seen his Geodesic design, through pictures of the Montreal Biosphere, a museum dedicated to the environment.
More with less
The essence of Fuller’s philosophy was to solve the world’s problems by finding solutions that do more with less. Fuller translated this core philosophy into ideas, designs, and inventions in trying to solve problems around housing, energy, transportation, among other global problems. Doing more with less still resonates to this day and I find myself referring to it and quoting it during sustainability and social impact discussions, as well as other matters, not necessarily related to the environment, such as just finding and implementing efficient processes.
I do, however, believe that doing more with less to be at the core of almost all the solutions, especially regenerative ones, that we are trying to put in place to make our planet more sustainable. But the real reason that I brought the work and philosophy of Fuller here is for inspiration and to highlight what he believed in. That is one person’s work, no matter what budget or circumstances they are working under, can make a difference for the betterment of all people and the planet.
In a recent conversation with Adam Woodhall, the award winning CEO and founder of General Counsel Sustainability Leaders, which until recently was called Lawyers for Net Zero, the dentsu Legal & Compliance team’s Social Impact Working Group discussed a few topics that we thought are worth highlighting in this article.
How to advise on ESG issues
What we wanted to tackle in our discussion was how the legal function, in global companies, advise their boards or clients on ESG issues, sustainability in particular, in the current global landscape of push and pull on ESG that we are seeing in different regions.
As we all know, the EU’s Corporate Sustainability Reporting Directive (CSRD) that requires companies to file mandatory annual sustainability reports will become effective January 2024. Thousands of non-EU companies, that operate in the EU, will be required to produce such reports. On the other hand, in the U.S., the proposed SEC Rules on mandatory reporting on climate risks that were to become final last year, are still being reviewed, and judging by the latest legislative actions in Congress, they are probably going to remain voluntary. California’s legislature, on the other hand, just passed two bills that impose reporting obligations on certain public and private companies that operate in that state. California’s governor signed both bills into law on October 7, 2023.
Global companies regularly deal with cross-jurisdictional compliance requirements and the eventual conflict between the EU and U.S. on climate disclosures is nothing new. An example would be EU General Data Protection Regulation (GDPR). While regulations similar to GDPR did not exist in the U.S. at the time GDPR became effective, U.S. and non-EU companies operating in the EU scrambled to put a compliance framework in place to avoid being fined, and eventually did, one way or another.
Companies, however, may need to pay close attention to their messaging on ESG-related goals and initiatives in the markets where the compliance regimes are in conflict, to avoid litigation and reporting risks. The conflict in reporting requirements in areas around sustainability could be delicate due to geopolitical environments and differences that may indeed influence a company’s messaging on its ESG goals and initiatives.
ESG helping in the long run
The advice may be for such companies to keep focusing on how its ESG goals and initiatives are helping the company in the long run, instead of taking sides, or scrapping their initiatives all together due to geopolitical pressures.
A company or a brand may lose credibility and standing with its consumers when they change their message between regions or abandon their goals and initiatives due to pressure, from either side of the spectrum.
Additionally, reporting will most likely become part of companies’ financial disclosures, whether mandatory or voluntary. Putting a compliance framework in place and starting to collect relevant data may serve companies well.
Practical advice on complex issues
Adam saw that legal can get on the front foot to demonstrate that its function was not just a reactive adviser and had some fantastic practical guidance for legal to use in advising on such complex issues.
Adam stressed that legal should (i) develop pertinent internal communications on the subject aiming to bridge silos, (ii) engage in regular meetings with their teams and with the business for alignment, (iii) make a business case for the legal team to have the necessary resources, if needed, (iv) find internal ‘sustainability’ buddies and engage with them regularly, (v) block out time to focus on actions and produce thought leadership, and most importantly (vi) engage with industry bodies, government and regulators proactively to keep current with developments, new laws and regulations and take action.
We then discussed how global companies remain focused on their long-term ESG goals and initiatives, while navigating new regulatory laws and regulations across jurisdictions, especially where in some of these jurisdictions, the economy is in a downturn. Specifically, what role does legal play, aside from advising on legal risks, especially around shifting, refining, or repurposing their companies’ ESG goals and initiatives to be specific for such period.
Remaining focused
Legal & compliance play a crucial role during difficult periods, especially when a new compliance framework is needed. Companies may well be advised to remain focused on its long terms ESG goals and initiatives by promoting the progress of such programs on a global level, stressing their long-term economic benefits.
The legal & compliance team, on the other hand, should closely collaborate and align with their business to ensure that any messaging on progress during such periods, doesn’t carry risks especially for the markets where mandatory reporting will be needed. It is advisable that any messaging, especially if it relates to a company’s net zero claims and aspirations, be reviewed by legal to ensure that such claims can be substantiated and verified.
During such difficult periods, Adam thought that legal could be the calm and wise voice of the companies and while advising on legal risks was essential, legal should also focus on incentives for adopting ESG policies and goals during such periods.
Do’s and Don’ts
Adam offered three don’ts and five do’s. Don’t sweat the small stuff, don’t let perfection get in the way of good, and don’t try to please all the people all the time. The “do’s” were, do understand how change happens, work out who are the key audiences with most influence, plan and build iteratively for growth with great strategic thinking, humility, and self-awareness, and lean in and grow resilience. For inspiration, Adam referred us to Sapiens: A Brief History of Humankind by Yuval Noah Harari, stressing the power of storytelling.
Navigating greenwashing
Greenwashing is an area that has been receiving enhanced attention by regulators and their enforcement bodies. Companies and their legal & compliance functions have been busy putting in place the necessary policies and procedures to reduce the risks of greenwashing claims and litigations. A guidance to mitigating such risks has been brilliantly illustrated in a recent article entitled: “Navigating the Risk of Greenwashing” by Harvard Law School Forum on Corporate Governance, posted by Peter Pears, Tim Baines, and Oliver Williams, Mayer Brown LLP, on July 24, 2023.
According to the authors, “mitigating greenwashing risk lies in existing principles of good practice with respect to governance, disclosure and due diligence, in combination with an understanding of the sustainability profile of the product, activity or transaction at hand.”
The authors went on to give some “good practice steps” to follow around governance, disclosure and due diligence that legal & compliance functions, no doubt, are most familiar with in other areas. For example, a company must have policies and procedures to reduce the risks of litigations related to their products and services, and greenwashing risks can be addressed similarly, but with some adjustments to fit sustainability matters.
A recent decision from the U.S. National Advertising Review Board is important to note here, as it will probably shape the new Green Claims Guides that the FTC is anticipated to publish soon. It is anticipated that the FTC will codify this opinion in a rule saying that an advertiser would be providing misleading messaging if it says it is committed to be net zero by a certain date without already being in the process of implementing a documented plan that has been evaluated and found to have reasonable expectation of achieving net zero emissions by that date.
This is essentially a guidance on how a company should message on net zero claims and aspirations, in advertising. Similar guidance already exists in the U.K. Green Claims Code, for example, as well as, in the proposed EU Green Claims Directive.
Summary
Economic pressures, geopolitical differences, and conflicts between jurisdictional regulatory regimes around the world will always present challenges for global companies. Regardless, such companies, in close collaboration with their legal & compliance functions, are advised to have clear strategies, policies and procedures, and training in place to effectively comply with the new climate reporting requirements, mandatory or otherwise. Similarly, putting in place a robust compliance framework to navigate and avoid greenwashing risks, including those that relate to a company’s net zero claims and aspirations, is essential.
About the Author
Bassam Messaike is a legal director with dentsu, a global marketing and advertising services company.
He has been with dentsu in various positions for almost eight years, including General Counsel in the MENA region, a dedicated corporate counsel to iProspect, and currently co-leading and supervising legal support for dentsu media service line in the Americas on all matters related to media advertising & marketing services.
Bassam co-leads dentsu Legal and Compliance Social Impact Working Group and a member of dentsu global pro bono Working Group.
His post-qualification professional experience includes media advertising & marketing, commercial & construction contracting, real property, immigration, general business and related litigation. He is a 2023 Leadership Council on Legal Diversity (LCLD) Fellow; 2023 Graduate - Cambridge University Sustainable Marketing, Media & Creative Course, and 2022 McKinsey Asian Executive Leadership Program Alumni.
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