General Counsel Can Sink or Swim in the Rising Sea of Decarbonization

Reprinted from the ACC, Association of Corporate Counsel

There is a new wave of decarbonization and sustainability. It is here because companies want to do the right thing, and their customers, investors, and other stakeholders demand increased commitments. In addition, there are regulatory, reputational, and other risks in not acting.

Because the legal team plays an important role in reducing risk and finding opportunities, in-house attorneys increasingly find themselves addressing climate change-related issues. Today, General Counsel is instrumental in addressing climate change risk, finding opportunities in a low-carbon economy, and positioning companies to sink or swim.

So, in a rising sea of risks and opportunities, what is in-house counsel to do?

1. Set the tone from the top to future-proof operations

General Counsel are in a unique position to work with investors, the board, and executives to determine the company’s climate change-related risks and opportunities, and to then establish the company’s related strategies to future-proof operations. In rolling out those strategies, attorneys can create the right culture and policies, setting the tone from the top regarding the company’s true commitment.

2. You can’t manage what you don’t measure, so set up great internal reporting

It is now common to see companies making time-bound carbon and sustainability commitments and targets, such as reducing CO2 emissions x% by _____, becoming carbon neutral by a certain date, and/or setting an internal carbon price. But does the company understand what it will take to achieve those commitments and have plan in place? Does the company have a protocol-compliant, science-based carbon accounting system in place to track the KPIs and metrics needed to achieve its goals?

You can’t manage what you don’t measure. In-house counsel should be involved in ensuring that the right carbon accounting systems and internal reporting is in place, so that the c-suite and other employees can track progress. This is why reliable, continuous carbon accounting is so important.

3. Avoid greenwashing and bolster your brand with external reporting backed by data and science

Companies report their commitments and progress to outside stakeholders, including investors, customers and reporting organizations, such as the CDP. They are also seeking third-party labels, such as through the Amazon Climate-Pledge Friendly Program. With “green” claims on websites, social media, reports, third-party label applications, and more, there is an increased risk of greenwashing (i.e. false and misleading environmental claims) in careless public statements and glossy reporting. In-house counsel can minimize this risk with robust review procedures and ensuring that the company has science-based data to back its claims. As investors and customers become more and more sustainability-savvy, it will become increasingly important for climate and sustainability-related claims to be transparent, withstand outside scrutiny and avoid being misleading, not only due to potential legal claims, but also due to the negative effects on a company’s brand.

4. Button up the Upstream and Downstream Value Chain

Carbon accounting and sustainability metrics are intertwined with the efforts of other companies in the value chain. This is why investors flow down carbon reduction requirements to their portfolio companies, and companies such as AT&T and Walmart do the same when procuring products and services. In other words, it is often the case that meeting sustainability commitments requires action and reporting throughout the value chain.

In-house counsel is positioned well to help ensure this action and reporting because they often play crucial roles in investor relationships, as well as in establishing and approving contract and procurement requirements. These requirements should typically include regular, science-backed carbon reporting, showing compliance and progress towards agreed-upon goals.

Whatever the industry sector, General Counsel is instrumental in addressing climate change risk, and positioning companies to sink or swim as they decarbonize and make operations more sustainable. And, if General Counsel succeeds, not only will they set up their companies to thrive, they will also be vital in fighting climate change itself.

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