ESG: What and How Significant Is It? With “proxy season” kicking into high gear, issuers are already beginning to think about how to address concepts that are both complex and amoeba-like: environmental, social, and governance (“ESG”) matters. According to some leaders in the field:
1. The ‘E’ captures energy efficiencies, carbon foot printing, greenhouse gas emissions, deforestation, biodiversity, climate change and pollution, waste management and water use.
2. The ‘S’ covers labor standards, wages and benefits, workplace and board diversity, racial justice, pay equity, human rights, talent management, community relations, privacy and data protection, health and safety, supply chain management and other human capital and social justice issues.
3. The ‘G’ covers the governing of the ‘E’ and the ‘S’ categories—corporate board composition and structure, strategic sustainability oversight and compliance, executive compensation, political contributions and lobbying, and bribery and corruption.
Mark S. Bergman et al., Introduction to ESG, Harv. L. School Forum on Corp. Governance (Aug. 1, 2020). As Squire Patton Boggs’ Jim Maiwurm explains, dealing with these topics—especially as disclosure guidance becomes more demanding—is only in the early stages. What some view as relatively modest new disclosure requirements, however, may not really be very modest at all. Moreover, as issuers interact with these disclosure issues they may be drawn into much more fundamental questions about who they are, and want or need to be. It may well be in the interest of issuers, their stockholders and other stakeholders – and boards – to become proactive and fully engage on these matters rather than being taken for a ride in a boat with a torn sail in stormy waters.