On July 12, 2023, Vinson & Elkins counsel Jon Solorzano, former Senior Director, Legal and Corporate Development for The Clorox Company, joined Pam Cone of Amity Advisory for “ESG: Balancing Priorities at the Leadership Level.” Practicing Law Institute produced the program, and more than 350 lawyers registered, representing many of the country’s largest corporations. At Clorox, Jon helped build and manage a comprehensive ESG (Environmental, Social and Governance) program and led the company’s ESG strategy, stakeholder engagement and ESG reporting.
Jon explained, ESG in its simplest form can be seen as a risk management framework to help companies and investors identify and manage risk. The concept of ESG has been around for decades. Still, it has gained increasing attention recently due to the growing understanding of the appropriate role of corporations, their management teams and their boards to oversee and manage risks posed by areas that can have long-term impacts on the value of a company, including climate change, diversity, worker safety but can also be thought of as opportunities for companies to differentiate themselves versus industry peers. There has been an increasing demand from investors for companies to be more transparent about their ESG performance and these demands are evolving from voluntary reporting regimes to regulatorily required ones.
As the investor base has changed significantly in the last 20 years, with a concentration of assets held by a few large institutional holders, it has given great attention to ESG issues. These holders are looking for long-term risk management, and appropriately managing and reporting ESG performance and progress is a way to achieve that. Jon pointed out the importance for lawyers to listen to what leaders of shareholders such as BlackRock and Vanguard are saying regarding the importance of ESG in a company, how to appropriately address competing stakeholder interests, and to help bridge the understanding of other executives in a corporation who may not fully appreciate the fiduciary duties that officers and the Board of Directors ultimately have to their shareholders. By considering these ESG factors — through good engagement with companies and by being provided meaningful disclosure — investors can better understand the long-term prospects of an organization and its ability to withstand evolving demands from stakeholders, how its operations might be affected by climate change, and how resilient the company might be to emerging business models and changes to the broader financial system.
While the ESG conversation has become politicized, which has led some to stop using the acronym, the expectation on companies to think about both short-term and long-term risk management and value creation remains.
Legal departments within companies need to understand the ESG landscape to translate it to… Read more
