As a lawyer, I worry probably too much about potential liability. Of course, much of it is needless paranoia because lawsuits and regulatory investigations are so rare when it comes down to it.
But when lawsuits and regulatory investigations do arise, you realize that you were worried for good reason. The fingers start to get pointed. And as the lawyer on the team, most of those fingers wind up being pointed at you.
This is somewhat of an aside for my real point in this blog. One of the most common mistakes these days for ESG reports is not knowing who needs to see the drafts. Sure, there is a liability component to this – you want the right people to review what will be disclosed to ensure its accurate and not omitting anything. Or that there is some disclosure that appears to be out of context. That’s the compliance concern.
But there are process concerns as well. You probably have a pretty strict timeline of what gets done when. And if you suddenly need to jam up the works by having some last-minute reviews by parties you forgot about, it can really screw up the planning. Mess with your Time & Responsibility Schedule.
The layers for an ESG report are different than the proxy and the 10-K. People tend to be more skittish about numbers in the ESG report, understandably worried about their reliability. So more reviews might be necessary for them.
And since it’s a relatively new document, there might be more people interested in having a say this year compared to last year as the visibility and importance of the ESG report grows. And as the ESG report becomes more of a messaging document, more people internally care. It’s a process that isn’t mature and it is still evolving.
For example, if your company has a very active PR or Communications department, they may eventually want to get “in” on the ESG report. If so, it would be wise to get them involved early since the document’s design is something they might be keen to comment on.
A brand new design late in the drafting process can really throw a wrench into a well-thought out deadline as it takes a lot of time to rethink about which disclosure goes where if that happens. You’ll want to share the proposed design with PR or Communications even before it’s populated with any disclosure.
And you might be surprised to learn that senior management – and even members of the board – sometimes care about reviewing the ESG report. So you’ll need to ascertain who within that group needs time to review it. Sometimes the board will even comment on the design aspects of an ESG report. Not a happy day.
Try not to be scared that such top authority figures are going to review your work. Don’t let that impact how you draft disclosure. Don’t become too conservative and hold back on some disclosures that you know in your heart should be made. Disclosure should be drafted to not be misleading nor omit anything material. That’s a liability standard and is important.
The bottom line is that you could be surprised how many people need to review some – or all – of an ESG report if you’re coming over from the proxy disclosure side of things. Know your internal audience as soon as you can to avoid unexpected surprises…
