CLM and ESG reporting: Find out the facts

Like it or not, your organization’s Environmental, Societal, and Governance (ESG) actions are being scrutinized. It doesn’t matter whether you’re a private company – people can decide to purchase from you or not according to how they perceive your organization or know how you treat people and the planet. Depending on whether you’re public or private, you may or may not be required to share some or all your ESG data with the world. But investors and stakeholders take note of your actions – good or bad.  

Take the example of H&M, the clothing retailer that was caught dumping clothes in New York City back in 2010. As recently as last year, they are still trying to clean up the ramifications.  

So how is everyone else handling the ESG landscape? Who is responsible within organizations for ESG? How are successes and failures being tracked? What reporting mechanisms are being used so you can be sure to communicate to the outside world your ESG accomplishments?  

Agiloft conducted a worldwide survey of top executives in collaboration with Christine Uri, Founder of ESG for In-House Counsel, to understand where ESG stands today and how organizations are handling it. For a quick synopsis, keep reading, but for the full report, download it here.  

Representatives from a variety of industry sectors responded, but largely came from technology, healthcare, and finance/banking sectors. This data tells us these sectors are feeling the pressure of ESG more than others. In our report, Uri expounds upon how each of these sectors is feeling the impact of ESG differently, and how tech, in particular, feels the pressure from two sides— both their large enterprise clients and the tech investors.  

Who’s responsible for ESG within organizations? 

It seems more and more, it’s the Chief Legal Officers and GCs getting involved in ESG due to the originating contract language that puts the ESG compliance gears into motion. That doesn’t always mean they know what their company is up to or are promising on the ESG front, though. Sometimes it’s as simple as checking your website to find out what the communication team is publicizing as your ESG accomplishments. There is also the fear greenwashing of making false or misleading statements about the environmental benefits of a product or practice.  

Our findings show that 67% of our respondents had dedicated ESG headcount in their organization. This is great news not only for investors and stakeholders but for the organizations themselves. ESG can mean a higher value for the company itself and can be considered a competitive differentiator. You should worry if you are one of the 33% who aren’t considering ESG, your competitors are. ESG can be a big draw for consumers and investors alike who will turn away from companies that don’t support ESG initiatives. 

Which letter of the acronym should be the focus? ESG Focus 

For the organizations that do reap the rewards of ESG, what exactly are they concentrating on? Almost half focuses on all three elements of the acronym, but if there is one that stood out in our survey, it’s Environmental. According to a Stanford study, 78% of the world’s largest institutional investors rank climate change and or carbon emissions as the most important environmental factors they explicitly consider when making investment decisions.  

Our report also explores the origins of pressure to conform to ESG and how the information is disclosed and shared.  One of the notable statistics we found was how organizations are tracking their ESG compliance. A lot of folks just request the data as they need it from the different departments, or they use spreadsheets. Is anyone else cringing out there?!  

How to use CLM for ESG tracking 

A small percentage developed bespoke technologies for ESG tracking purposes, but a few innovative people from our survey use their Contract Lifecycle Management (CLM) solution for tracking ESG compliance. It’s all about the data.  

Uri says: “There is a lot of room out there for companies to further leverage their CLM technologies for ESG.” This is a new idea for most in-house legal teams, but there is a huge benefit – maybe even a competitive differentiator – in utilizing your CLM this way. Some of our respondents use their CLM for compliance reporting or even implement template language into their contracts and use AI to run a scan to ensure any incoming third-party paper includes, or excludes, certain ESG language. AI can be also used to create prompts to detect nuances, or even halt the workflow if there is non-compliant ESG language present.   

See how organizations are handling their ESG matters and how you compare. Download the full report with all the findings, statistics, and Christine Uri’s insights here.