How-to guide: What general counsel (GC) need to know about ESG (Global) 

Introduction

This how-to guide provides guidance for general counsel (GC) and their teams on understanding and navigating environmental, social and governance (ESG) in their organisations. It suggests ways to drive responsible business practices by promoting ESG within an organisation.

The guide covers the following:

1. ESG and why it is important to the GC
2. How GCs implement ESG into legal services
3. Practical methods for a GC to promote ESG in an organisation

It is aimed at GCs, in-house lawyers and compliance officers in organisations of all sizes and sectors in the UK and can be read in conjunction with How-to guide: Understanding ESG (Global).

Section 1 – ESG and why it is important to the GC

ESG is an acronym for the environmental, social and (corporate) governance aspects of an activity. The term refers to these three key factors, which are used to measure how sustainable and ethical an organisation is from a corporate governance and investment perspective, and increasingly from an employee perspective.

It is often used in conjunction with the terms ‘responsible business' and corporate social responsibility (CSR). CSR emerged as a concept before ESG and described how to make businesses accountable (to environmental and social issues) from an ethical and moral perspective. It was often viewed as diluting financial value while at the same time being fundamentally important, particularly from a reputational perspective. This view has evolved, and business leaders now acknowledge that ESG factors can be financially material and (with growing attention from investors, regulators and other stakeholders on environmental and social performance), businesses across the globe are integrating material ESG factors into their core strategies, operations and activities. ESG factors are measurable. They are underpinned by metrics and by reporting on ESG issues that are financially material to a business and its investors.

GCs occupy a unique position in the ESG, often participating in executive-level and boardroom decisions, which requires them to balance operational demands risk mitigation priorities. They understand the ESG corporate objectives, while also balancing the risk that might arise from corporate actions or inactions underpinning the objectives.

1.1 Measuring ESG impact - ESG frameworks

Investors use an ‘ESG score’ to assess a company’s exposure to ESG risk from an investment perspective. A high score reflects a safer (ESG-focused) investment.

ESG scores are calculated using metrics from an ESG framework, which is a system for standardising the reporting and disclosure of ESG metrics. These frameworks set the metrics that a company should disclose, as well as the format and frequency of the reporting, to help investors make informed decisions.

There are various voluntary and aspirational frameworks globally that have been developed to measure ESG. The landscape is, however, increasingly being shaped by mandatory reporting requirements, most notably the European Union’s Corporate Sustainability Reporting Directive (CSRD), which requires large and listed companies to disclose against detailed European Sustainability Reporting Standards. In parallel, the International Financial Reporting Standards Foundation (IFRS) intends to develop global standards around ESG, which has been endorsed by investors and regulators across the globe, but currently, there is no common standard or framework.

Listed below are some examples of ESG frameworks and organisations promoting ESG among investors.

• The Global Reporting Initiative (GRI) framework is a set of standards for responsible environmental, social, economic and governance conduct. It covers a variety of topics and can help with ESG reporting. The GRI standards are designed to be universally applicable to all types of organisations and sectors, large and small, across the world.
• The Climate Disclosure Standards Board (CDSB) framework is for reporting environmental and climate change information in mainstream corporate reports, such as an annual report. Currently 374 companies worldwide, across 10 sectors (with the top three sectors being finance, industries and consumer discretionary), are using the CDSB framework. The CDSB framework has since been consolidated into the IFRS Foundation and now contributes to the IFRS Sustainability Disclosure Standards (IFRS S1 and S2). These standards, developed by the International Sustainability Standards Board (ISSB), incorporate elements from CDSB, Sustainable Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD) to create a unified global baseline for sustainability reporting. This alignment ensures company disclosures meet investor expectations and support comparability across jurisdictions.
• The UN Principles for Responsible Investment (PRI) is an organisation dedicated to promoting environmental and social responsibility among investors globally. The organisation relies on voluntary disclosures made by participating members (called signatories). The first principle of the organisation is to incorporate ESG issues into investment analysis and decision-making processes.
• The European Sustainability Reporting Standards (ESRS), developed by EFRAG under the CSRD, mark a significant shift in the ESG reporting landscape by introducing mandatory, sector-agnostic disclosures based on the principle of double materiality. These standards require companies to disclose not only how sustainability issues affect their financial performance, but also how their operations impact people and the planet. The ESRS include detailed data points on environmental, social and governance issues, and require integration into the management report, subject to limited assurance. Sector-specific standards and SME-specific frameworks are expected from 2026. For UK GCs advising companies with EU operations or value chains, understanding the ESRS framework is critical for ensuring compliance and legal defensibility of disclosures.
• The Carbon Disclosure Project (CDP) serves as a leading global platform for voluntary environmental disclosure, enabling companies to report on climate change, water security and deforestation risks. While CDP is not a regulatory requirement, it is widely used by investors, stakeholders, and procurement teams to assess environmental performance. In 2024, CDP aligned its climate disclosure questionnaire with the IFRS S2 and TCFD recommendations, enhancing its compatibility with mandatory disclosure frameworks. GCs should be aware of CDP’s growing influence as its scoring methodology is increasingly used as a proxy for ESG performance in investor and supply chain assessments. Legal teams may also need to vet CDP responses to ensure they are consistent with other public disclosures and defensible under anti-greenwashing and securities laws.

ESG reporting can be daunting due to its scope. Technology can help to streamline the process. The right technology will help efficient tracking of the relevant metrics across the organisation and its supply chain. GCs can get help from third-party data providers and industry consultants to set up data collection and reporting structures.

1.2 ESG and the role of the GC

ESG is a critical consideration for executives seeking to enhance business performance, so GCs need to be well-versed in it. Organisations need to surpass mere legal and regulatory compliance to maintain relevance with investors, employees and regulators by demonstrating a commitment to sustainability values. They also need to show that the organisation is adding value in environmental, social and corporate governance.

Set out below are some of the reasons why adhering to ESG has become more significant to organisations and established as an important aspect of a GC’s role as an advisor to the organisation’s board.

1.2.1 Increased legislation

ESG is increasingly subject to national and international laws, including mandatory reporting and disclosure requirements. For more information on the legislative instruments driving ESG globally see: How-to guide: Understanding ESG.

1.2.2 ESG governance and strategic leadership

GCs play an important role in advancing ESG governance and leadership within organisations. This includes advising on how to strengthen the board's understanding of ESG matters, develop appropriate ESG policies, conduct due diligence and risk-mapping exercises, and increasingly align executive remuneration with ESG-related performance indicators.

Key responsibilities may include:

• advising boards and senior leadership on ESG-related legal risks, including climate-related liability, human rights exposure and supply chain transparency;
• supporting the establishment or enhancement of ESG governance structures, such as sustainability committees, ethics frameworks and whistleblowing mechanisms; and
• ensuring that directors' duties (for example under the UK’s Companies Act 2006, particularly the section 172 duty to promote the success of the company), are discharged with appropriate reference to ESG considerations and long-term sustainability.

GCs are also increasingly involved in aligning internal legal strategies with an organisation’s external ESG commitments. These may include climate transition targets, modern slavery statements and diversity, equity and inclusion (DEI) goals.

For more information on advancing ESG within an organisation see: Checklist: Mainstreaming sustainability into a corporate governance framework (UK), How-to guide: How to implement sustainable corporate governance (UK), and How-to guide: How to navigate the interaction between directors’ corporate governance duties and ESG.

1.2.3 ESG disclosures and reporting

As regulatory expectations around sustainability disclosures continue to evolve, the distinction between financial and non-financial reporting is increasingly diminishing. Frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD), the EU’s Corporate Sustainability Reporting Directive (CSRD) (which is applicable to non-EU entities with operations in the EU) and anticipated UK-specific sustainability standards, are accelerating this convergence. In this context, the GC plays a pivotal role in ensuring the accuracy, consistency and legal defensibility of ESG-related disclosures.

Key responsibilities typically include:

• reviewing and approving ESG disclosures contained in annual reports, sustainability statements and climate-related risk communications to ensure they are clear, accurate and not misleading;
• advising on legal liability risks associated with ESG-related representations, including under consumer protection and financial regulation regimes (eg, the UK Financial Conduct Authority’s anti-greenwashing rule);
• collaborating with sustainability, finance and compliance teams to evaluate the materiality of ESG data and its alignment with applicable reporting standards;
• monitoring developments in global ESG disclosure frameworks, such as the ISSB standards and CDP reporting, to ensure ongoing compliance with both mandatory and voluntary requirements; and
• overseeing internal controls and assurance processes around ESG data collection and verification, including liaising with internal audit teams or external assurance providers to ensure credibility and reduce the risk of legal challenge.

The GC plays a critical role in ensuring that corporate ESG commitments are matched by credible and compliant disclosures, thereby supporting both regulatory obligations and stakeholder confidence.

1.2.4 A rise in ESG investing

ESG investing is a strategy where investors invest in businesses that are environmentally and socially sustainable and led by a management team that achieves these goals via good corporate governance. A substantial number of investors are signed up to the Principles for Responsible Investment (PRI). According to PRI’s Annual Report 2025, as of March 2025 had 5,621 signatories, of which 748 were asset owners. Assets under management (AUM) of PRI’s signatories have grown from less than US$6 trillion at PRI’s launch in 2006 to US$139.6 trillion as of 31 March 2025 in assets worldwide.

According to a report published in 2024 by the Institute for Energy Economics and Financial Analysis (IEEFA), ESG investments outperformed traditional funds and exchange-traded funds (ETFs), despite facing perception challenges and regional differences. A July 2025 briefing note that revisited the topic found that some sustainable funds generated better returns than traditional funds in Q1 of 2025, with global large-cap sustainable funds gaining 2.09% versus their conventional peers posting losses over the same period.

A 2023 analysis by consultancy firm McKinsey found that companies that achieved better growth and profitability while improving sustainability and ESG outgrew their peers and exceeded them in shareholder returns.

In 2022 survey by PwC, 90% of asset managers surveyed believed that integrating ESG into their investment strategy may improve overall returns. Another 60% reported that ESG investing had already resulted in higher performance yields compared to non-ESG equivalents. According to PwC’s 2025 Global Investor Survey, 71% of investors surveyed agreed that companies should incorporate ESG and sustainability in their corporate strategy.

ESG metrics are often used during investment analysis to assess a company’s exposure to ESG risk as described in Section 1.1. This means that the accuracy and quality of a company’s ESG disclosures directly affect investor confidence, creating a clear role for the GC in ensuring that reporting is aligned with applicable standards and free from legal or reputational risk.

The increased focus on ESG by investors means more companies are reporting on their ESG performance voluntarily in their annual reports. Some jurisdictions are drawing up mandatory standards to help companies better incorporate ESG factors in their reporting. For example, in 2015, France became the first European country to set ESG reporting obligations for institutional investors through Article 173-VI of the French Law for Energy Transition and Green Growth. In 2022, the UK was the first G20 country to make it mandatory for its largest businesses to disclose their climate-related risks and opportunities in line with the TCFD Recommendations. GCs play a key role in guiding companies through these frameworks, advising on legal obligations, and safeguarding the credibility of ESG disclosures to maintain investor trust.

Embodying ESG principles can lead to long-term advantages and make a business more attractive to investors, while organisations failing to implement a robust ESG framework may fall behind. For GCs, this makes ESG not only a compliance issue but also a strategic lever, as their advice shapes how a business demonstrates accountability and secures access to capital.

Section 2 – How GCs implement ESG into legal services

GCs are uniquely placed to drive ESG change as they sit at the intersection of legal, compliance, reputation and risk and are often involved in C-suite decision-making. A GC who is well-versed in the corporate objectives of ESG can harness their legal insight and position to drive actions that ensure the effective management of any negative environmental and human rights impacts and limit any harm that could come from certain corporate actions.

However, GCs cannot push for their companies to embrace ESG initiatives or develop an effective ESG reporting framework alone. A GC should work in conjunction with the board, the C-suite and, if the organisation has one, the compliance officer and company secretary to help influence a change in company culture through actions such as creating new company policies that incorporate ESG principles. ESG reporting is usually made to either the CEO or Chief Legal Officer.

The compliance officer (CO) is uniquely placed to implement ESG principles given their focus on corporate governance. It is becoming more common for companies to include ESG frameworks in their governance structure and to publish ESG policies and guidelines.

2.1 Shaping an ESG strategy

GCs should assess their organisation’s operations and ensure that there is an effective ESG strategy, as well as monitor and advance the organisation’s performance on such matters. As many ESG developments are driven by law, in-house legal teams are well placed to anticipate changes. They must integrate ESG into the legal services they provide to support the organisation to accommodate the changing legal landscape. ESG can be seen as a new legal practice area, and GCs therefore need appropriate support or expertise, either from internal sources or external specialists to be able to advise their organisations appropriately. Organisations might be concerned about the risk of reputational damage for ESG failures or disclosure issues and losing investors.

Listed below are some steps that GCs can take to help shape their organisation’s ESG strategy.

• Ensure the organisation aligns with any applicable disclosure framework. For example, in the UK, following the publication in 2021 of the Green Paper Greening Finance: A Roadmap to Sustainable Investing, the Sustainability Disclosure Requirements (SDR) regime was launched and is being phased in from 2024-2025. SDR builds on the roadmap by providing a more robust and comprehensive framework for companies, investors and financial products, requiring disclosures on governance, strategy and risk management, as well as alignment with the UK Green Taxonomy. These measures are designed to enhance transparency, provide investors with consistent and reliable information, and support the UK’s ambition to remain an attractive hub for sustainable investment.
• Ensure that the organisation’s practices reflect its ESG considerations. This requires an understanding of its stakeholders and their expectations to set measurable targets to improve ESG performance. There needs to be a company-wide understanding of why the organisation is incorporating ESG practices. A practical way to communicate cultural change in the company to all stakeholders is through the creation of policies.
• To support their organisation in embedding ESG across its strategy and functions, GCs need to, for example, understand the organisation’s performance around ‘S’ factors, such as its exposure to forced labour and performance on equal pay and diversity.
• Challenge ESG claims to avoid greenwashing, and cement ESG considerations in all company actions. This includes conducting ESG due diligence of company contracts, assessing relationships with suppliers and subcontractors and ensuring that supply chains are compliant with ESG policies.

For more information see: How-to guide: How to approach and implement an ESG strategy.

2.2 Embedding ESG in internal policies and contracts

Beyond strategic alignment, GCs must also support the operational implementation of ESG principles through policy development and contractual commitments.

Integrating ESG into the legal function requires a proactive approach to reviewing and updating an organisation’s internal framework, including its policies, procedures and standard contract templates.

GCs should collaborate across departments to ensure that their organisation’s goals and objectives are met through policies such as:

• a code of ethics or conduct that clearly reflects ESG commitments, particularly in relation to anti-corruption, modern slavery and environmental responsibility;
• procurement and supplier policies that set out minimum ESG expectations, such as human rights due diligence, net-zero objectives and diversity, equity and inclusion (DEI) requirements; and
• disciplinary procedures and whistleblowing mechanisms that include ESG breaches as reportable incidents and provide appropriate protection for those who raise concerns.

These policies should be reviewed regularly and benchmarked against evolving industry standards, regulatory developments and emerging ESG risks, including climate resilience, digital human rights, and artificial intelligence governance.

Incorporating ESG considerations in commercial contracts is an effective way to align business relationships with the organisation’s values and risk management approach. GCs can lead this process by:

• including ESG-related warranties, undertakings and termination rights in contracts with suppliers, joint venture partners or investors. For example:
  • clauses requiring compliance with modern slavery legislation, such as the UK’s Modern Slavery Act 2015; and
  • termination rights triggered by a supplier’s failure to meet ESG obligations or audit requirements;
• developing standard ESG clauses that reflect relevant sectoral codes of conduct and international soft law frameworks, such as the UN Guiding Principles on Business and Human Rights or the OECD Guidelines for Multinational Enterprises; and
• ensuring that contractual dispute resolution mechanisms are equipped to address ESG-related issues, such as by incorporating expert determination or mediation processes focused on sustainability matters.

Organisations may also consider leveraging tools such as those developed by the Chancery Lane Project, which offers a library of climate-aligned clauses designed to support ESG integration through legal drafting.

Section 3 – Practical methods for a GC to implement ESG in an organisation

3.1 GC ESG implementation checklist

3.2 Define ESG risks and priorities and align governance with frameworks

An organisation should clearly define its ESG strategy and initiatives. Different industries have different risks and areas of focus. GCs can help to identify key areas of risk and support the development of the strategy based on this understanding. This means understanding the ESG landscape for your industry and defining which ESG issues are the most important to the organisation and its operations, and incorporating this information into the organisation’s governance model. A governance model outlines how people in authoritative positions hold themselves accountable to their stakeholders. An organisation’s mission, vision and values comprise the primary parts of a governance system. Incorporating ESG values into these will help set the tone for the company’s ESG journey. GCs can incorporate ESG into their governance model by using existing ESG frameworks to report and monitor the company’s ESG journey.

Some of the most popular frameworks that provide general guidelines include the following:

• Global Reporting Index (GRI);
• Sustainable Accounting Standards Board (SASB);
• Carbon Disclosure Project (CDP);
• IFRS Sustainability Standards;
• UN Global Compact;
• UN Guiding Principles on Business and Human Rights; and
• OECD Guidelines for Multinational Enterprises.

3.3 Engage stakeholders and develop policies

Collaboration with stakeholders is central to establishing an ESG strategy so that the organisation’s leadership is aligned with any proposed policies.

Stakeholders include those outside of the organisation, such as consumers, government policy makers, investors, NGOs and local communities. Their viewpoints need to be considered, and some will be required to help drive meaningful change.

GCs have a role to play in helping map out key stakeholders and ensuring the organisation has a mechanism for listening to each stakeholder group and communicating expectations to third parties. This means reinforcing expectations about conduct, support and engagement.

As detailed in Section 2.2 above, key policies with regard to ESG may include a code of ethics or conduct and procurement and supplier policies.

3.4 Lead ESG training

To support the effective integration of ESG across an organisation, GCs should lead or facilitate the development of internal training initiatives. These programmes raise awareness about ESG risks and clarify expectations for employees at all levels. Training may include:

• workshops for procurement teams on ethical sourcing;
• legal briefings for marketing teams on the risks of greenwashing; and
• leadership sessions on ESG governance obligations.

Training should be tailored to the specific needs of different departments and levels of seniority. It should also be updated regularly to reflect legal and regulatory developments and incorporated into onboarding processes for new staff. Where internal resources are limited, GCs can engage external specialists to deliver targeted training on specific ESG topics.

Embedding ESG understanding at all levels of the organisation helps ensure that relevant policies are not only established but are also reflected in day-to-day decision-making.

3.5 Monitor ESG KPIs

GCs can support the organisation in developing and applying ESG key performance indicators (KPIs) that allow for the monitoring of progress against ESG commitments. These metrics promote transparency and accountability and can help to inform broader governance and risk oversight. Common examples include:

• diversity and inclusion ratios;
• carbon emission reduction targets;
• supply chain audit results; and
• human rights due diligence outcomes.

Where appropriate, GCs may also advise the board or senior leadership on incorporating ESG-related KPIs into executive remuneration structures, helping to ensure that performance incentives are aligned with the organisation’s ESG objectives.

3.6 Grievance procedures

Another important step for GCs is to assist in the development of effective grievance mechanisms, such as whistleblowing, for employees or suppliers to make complaints anonymously. They allow people within the organisation and supply chain to raise their concerns and prevent issues from snowballing. GCs must ensure that there are safe and transparent processes through which people can voice their concerns. It is important that GCs are aware of the complaints faced by their organisation regarding ESG matters, to help in the process of monitoring and measuring the effectiveness of ESG initiatives and to take steps to mitigate harm before it escalates.

The United Nations Guiding Principles (UNGPs) define potential routes to support access to remedy in three categories:

• state-based judicial grievance mechanisms, for example, national tribunals or courts;
• state-based non-judicial grievance mechanisms, for example national human rights institutions and OECD national contact points; and
• grievance mechanisms offered by non-state actors such as businesses (including investors and companies), trade unions and NGOs.

For more information on whistleblowing see: How-to-guide: Understanding the role of effective whistleblowing in fostering an ethical and open workplace culture.

3.7 Produce ESG reports and statements

A GC should also support their organisation in producing an annual sustainability report.

An effective approach to this is to reference the annual sustainability reports and disclosures of leading companies in similar industries and incorporate the best parts of each.

Reporting on the sustainability of their organisation gives the GC a real opportunity to promote change, as they are usually responsible for leading the company’s shift towards ESG. However, the GC should at the same time be conscious of the risks associated with disclosing this information to the public. For example, disclosures about negative environmental impact or a poor diversity score could increase an organisation’s legal risk. These risks can be mitigated by outlining an organisation’s plans to address any issues that are disclosed.

GCs should also ensure that their organisations meet their disclosure requirements under laws such as the UK’s Modern Slavery Act and report on their progress transparently, showing how they are tracking and mitigating risk.

3.8 Review ESG data and claims for defensibility

GCs should contribute to the validation and legal review of ESG data used in reporting processes and any claims or statements made by their organisation in relation to ESG. This should include gathering and maintaining objective evidence in support of such claims.

This helps to ensure the information disclosed and any claims made are accurate, complete and legally defensible, reducing the risk of regulatory or reputational consequences.

This practical resource was produced in partnership with Ardea International.

Additional Resources

Dossier Thématique, Duty of Vigilance: The Vigilance Plan – Cornerstone of the Law on the Corporate Duty of Vigilance
HM Government (UK), Greening Finance: A Roadmap to Sustainable Investing 
United Nations Global Compact, Guide for General Counsel on Corporate Sustainability Version 2.0

Related Lexology Pro content

How-to guides:

Understanding ESG (Global)
How to understand and implement the ‘S’ in environmental, social and governance (ESG)
How to understand and implement the ‘E’ in environmental, social and governance (ESG)
How to understand and implement the ‘G’ in environmental, social and governance (ESG)
How to understand and avoid the risks of greenwashing
An introduction to sustainable finance
How to promote diversity and inclusion within an organisation (UK)
Business and legal developments related to climate change (USA)
Overview of climate legislation and regulation in the UK and Europe
How to create a supplier code of conduct (UK)
How to approach and implement an ESG strategy
How to navigate the regulatory and litigation risks associated with greenwashing in the UK and EU
How to assess suppliers for modern slavery risk (UK)
How to create a supplier code of conduct (UK)
How to develop a sustainable supply chain (USA)

Checklists:

UK Modern Slavery Act reporting requirements Section 54 (UK)
Modern slavery in supply chains (USA)
Conducting Environmental, Social and Governance (ESG) due diligence in supply chains (UK)
Greenwashing risk assessment (UK)

Quick views:

Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 1. Introduction to the CSDDD (EU)
Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 2. Compliance timelines and scope (EU)
Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 3. Complex terminology and key principles (EU)
Understanding the Corporate Sustainability Due Diligence Directive (CSDDD) – 4. Implementation challenges and practical tips (EU)
An overview of current ESG pressure points

Other:

Global research hub - ESG

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