GC: Alejandra, how would you describe what diversity and inclusion mean to you? Why are they important for the corporate landscape?
Alejandra Bogantes (AB): In an organization, they are very important, because we need to make people feel comfortable.
If you accept them and let them be who they are, you are going to have employees that want to work with you. If you defend them and respect them, they are going to respect the company, and try to accomplish our goals and our vision and mission.
GC: How would you characterize the diversity and inclusion culture at Walmart?
Bob López (BL): To give you the background on this approach, we have core values for the company. One of these core values is respect for the individual in regard to differences – differences in mindset, background, education and so on.
But we also have an ‘Associate Value Proposition’ (AVP), which has five different pillars. The first one is purpose, the second is challenge, the third one is opportunity, the next is enjoyment, and the last (but not least!) is inclusion. For us, it’s really important to be an inclusive company, and that’s why we made the decision to include this pillar as part of the AVP, both internally and externally.
At this point, we’re focusing our efforts on four different approaches for the company: gender equity; people with disabilities; the LGBTQIA+ community; and the non-discrimination pillar, which is the newest one, and is working towards eliminating those barriers when it comes to talking about race, for instance.
For the company, it’s really important, and it’s part of the business strategy. We have goals to reach, we have KPIs for the company, so we are putting together all of these different thoughts within the company.
We also have a diversity, equity and inclusion council. This is a group of business leaders that are working towards an inclusive workplace for everyone within Walmart. This is not like the typical HR team working for inclusion, it’s more about the business leaders working for inclusion for the company, and they are bringing their expertise, they are bringing their ideas, and they are the ones that are writing this change. They know the business very well, they know very well the pain points that we may have in the stores, in the distribution centres, or in the home offices, and they are putting in place an action plan towards a more inclusive environment in Walmart.
In addition, one of the key actions that we have implemented since last year is to partner with external organizations outside Walmart, so we can bring their expertise within the company, and make better decisions for our associates in every pillar.
GC: It’s interesting that you mention KPIs, because it’s that sense of ‘what gets measured gets done’. How do the KPIs work; what does that look like day-to-day?
BL: We have different KPIs in regard to gender equity, and with regard to talent with disabilities. We have a work engagement survey, and last year we included a voluntary self-ID for the LGBTQIA+ community and for people with disabilities. That way, they could give us their responses and we could assess how they feel working for Walmart and with that information we have created different action plans to improve the work environment for these groups. This is also the first year that Walmart México and Central America has included a self-ID for race, because we wanted to know if we had racial diversity within the company, and how we can leverage people’s working experience within Walmart.
GC: How is the legal team supporting the company in its diversity and inclusion efforts? How does the team fit into that structure?
AB: As a legal department, we are an example and a role model for the company. We have to always act correctly – and not only look like we are acting correctly. We have to make sure the company complies with its policies and complies with the law. We help HR and the committees when they have any kind of question. We support area staff operations too, to make sure that they can explain what we are doing – we know that there are a lot of people that have prejudice and we try to make people understand. For example, we sometimes have cases where customers don’t want to go to a certain cashier because he has long hair, or tattoos, and we as a legal department have to tell them, “well, he has the right to look how he wants – we don’t have policies about how you look at work”. We have to support our employees and make them feel safe and protected by us, and we as a legal department promote a lot of efforts to make people feel comfortable.
In our legal department, we have a lot of people of different ages, some of them have kids, some of them are single parents, some of them have different sexual orientations, and we try to make the team feel completely united. We are very close, and we try to let people know that one of our values is that we are a diverse group, and we have different ideas. For example, the younger ones sometimes promote ideas about tech systems that can work for us to make things simple, and you know that people, when we are older, we sometimes don’t understand how things are going to work. So, I think that we make a really good balance.
We follow the company’s policies, and in case someone doesn’t feel respected or supported, the company has an ethics department, where people can file a complaint and they will investigate to make sure that the legal department, like everyone in the company, is compliant with the policies, and with our ethics code of conduct.
We have an open-door policy, so that everybody can go to their boss, or the boss of their boss, or the CEO of the company, to explain their concerns, and they have to listen to them. They don’t have to be afraid of retaliation, because they are allowed to express what is concerning them.
GC: Do you think that in-house legal teams have an important role to play in driving D&I? How do you think in-house legal teams can contribute to that conversation?
AB: As a legal department, people are looking to us. If the legal department is doing something incorrect or is not promoting diversity and inclusion, people are going to think that they can act in the same way. The risk is that if the legal department is not compliant with company policies, people are going to consider that that is ok, because we establish what is good or not, or what is correct in accordance with the law.
Also, the legal department has a section in our engagement letter to external lawyers where we request them to promote diversity and inclusion in their firms. For us, it’s very important that our external lawyers share our values; that they try to make a difference in society.
I think that Walmart is really working to make a difference in terms of diversity and inclusion. We are a big employer in Mexico and Central America, and the company is really trying to invest in helping people to understand what diversity and inclusion is. If our employees understand, they are going to start making a change in society, they are going to make that change with our clients, and we are, I think, contributing a little bit to making a difference.
BL: Being one of the largest companies within the region, we truly believe we can make an impact because of the cascading effect that we may have across society.
Inclusion and diversity are gaining space in the corporate world. But the journey is long and requires not only speed, but resilience and intentionality. In Latin America, it is important to consider that the reality in Brazil is different than Mexico, Chile, Argentina… and even within the same country, it’s not the same. This plurality must be recognized and respected.
Inclusion and diversity, or ‘I&D’ as we call it at GE, is a business imperative. It is no different than other strategic pillars and embedded in ‘how’ we do business. People feeling valued and respected perform better, and this makes it fundamental for corporations. Diversity creates value for our customers, shareholders, and employees, and, at GE, we are committed to fostering an inclusive culture where everyone feels empowered to do their best work because they feel accepted, respected and that they belong.
My role as diversity and inclusion leader has been quite a journey, on which I embarked by putting into practice advice that many of us receive but not always listen to: to accept challenges even if we don’t think we are ready.
I’d been involved with the Women’s Network (WN), one of the employee resource groups (ERGs) we have at GE, for many years. I started my career with GE as an intern and being part of the WN not only allowed me to learn from experienced leaders, but also showed the power of these groups in creating a trusted network of people that help us grow professionally and personally. But when Rafael Palombini, GE Healthcare’s LATAM CEO, invited me to represent GEHC globally as Latin America’s I&D leader back in August 2020, it would be a much bigger responsibility. Although I’ve always been passionate about I&D, I was (and still am) no expert. After a candid conversation with him, where I was encouraged to focus on my willingness to learn as opposed to my limitations, I said yes.
This is a voluntary role on top of my responsibilities as general counsel. It is challenging to find the time, but all the learning, the people that I have met in connection with the I&D routine that I would otherwise not have met, the projects we are delivering and the impact – actual and potential – that the work of this team has, makes it more than worth it!
Together with the company’s senior leadership in LATAM, my role is to ensure that our inclusion and diversity strategy is embedded throughout our business, and to be the spokesperson for GE Healthcare Latin America with respect to I&D with GE Healthcare globally and regionally across the various GE businesses.
2021 has been an intense and rewarding year for I&D. All the GE businesses got together and, with the support of our employee resource groups, a strong I&D plan was developed, focusing on education and awareness, strengthening the leadership commitment and our culture of belonging.
To further the leadership commitment, an inclusion and diversity workshop was tailored to the reality of all GE people leaders in Latin America with the support of a consulting company. Almost 700 people leaders across the company participated in a three-hour interactive session that promoted reflection on empathy, unconscious biases, and how they are linked with GE’s Leadership Behaviors (act with humility, lead with transparency, and deliver with focus). We are pleased with the results, with an 80%+ approval rating from the participants.
In the talent pillar, leaders are encouraged to think of inclusive job descriptions – for example, is fluent English really a requirement? Why limit applications to people graduated from universities A or B?
One last example of our actions this year is the first GE census in Brazil. A self-declaratory anonymous survey was conducted to understand the diversity of the GE team regarding race, ethnicity, religion, gender, sexual orientation, disabilities, and other characteristics, to help guide the next steps in the company’s journey of inclusion and diversity. The level of engagement made us all really proud. More than 70% of the Brazil team participated in this important activity, carried out thanks to the support of many people but, in particular, the AAF (African American Forum) Brazil, one of our affinity groups.
For the legal profession, on top of everything, I&D is part of our jobs. There is a strong component that intersects with labor and employment, data privacy, compliance. The potential legal impacts of I&D-related matters are relevant, so it is naturally part of the legal professionals’ routine. Here with GE in Latin America, the legal and compliance team goes much further than their ‘legal hats’, actively engaging in various initiatives and being strong allies and advocates for inclusion and diversity.
I&D is really part of our job in the legal team. And, at GE, we are fortunate to have various legal and compliance team members not only engaged in connection with their day-to-day work (the Brazil census, for example, required a lot of support from the legal team as one of our main concerns was to make sure that all data privacy requirements were complied with), but as advocates, volunteers and allies, leading or actively engaged with employee resource groups, I&D initiatives, and promoting a culture of belonging across the whole company.
It is part of the job of any legal or compliance professional to look after the company’s culture and reputation. We need people need to raise their voices when they see something of concern… our job is to ensure that the environment allows for that. I once heard that behavior is driven by conviction, convenience or compliance… so I see that legal and compliance professionals have a lot to add, whether bringing technical legal insights or going beyond, as our team at GE does.
GE believes a commitment to equality, diversity, and inclusion is a key element in achieving the best legal representation by partnering with those who appreciate and include a diversity of perspectives, and who can bring more creative and innovative thinking to GE’s challenges. Outside counsel shall work actively in promoting equality, diversity and inclusion within all levels of their workplace, to make a diligent effort in the recruitment, retention, training and development, career progression and promotion of diverse lawyers and to afford such lawyers an opportunity to work on GE matters.
Having a diverse team brings different points of view to the table where a specific solution or point is raised because of the unique perspective of an individual based on their life experience and identity. I have been in situations where someone raised a point that was within my blind spot, and without which the group would not have reached its ultimate decision. I also believe that diverse teams have the ability to be more creative and innovative in their way of thinking leading to better decision making overall.
A diverse team also tends to share more and therefore tends to be more involved and more engaged. Better engagement results in teams with strong talent retention. Beyond being good for performance, it also results in a better work environment, better culture, happier employees and gives you more access to a better talent pool – it’s a good cycle to be in.
Another key aspect to the importance of diversity is when it comes to leadership positions. When younger diverse talent sees people who reflect their own diversity in leadership, they see people that they can identify with and feel more represented and willing to stay for longer in an organization. For example, if you are a woman and see other women in leadership positions, I think there is a sense that you can trust that your own perspectives will be better represented because similar life experiences create an empathy.
Beyond gender, I think the importance of representation goes for all traditionally underrepresented groups. If you have people in leadership positions with different identities, backgrounds, etc., it creates a greater sense of trust that anyone that works hard can succeed, regardless of their background. In addition, this trust become cyclical because once you succeed you want to stay and help lift up those who are coming up behind you. All of this creates a better environment, group of talent and overall performance, as studies have shown.
When it comes to how we serve our clients, having diverse teams is also incredibly important because studies show that diverse teams consistently outperform teams that lack diversity. It is also critical that we are able to demonstrate value alignment with our clients when it comes to fostering an inclusive culture. Many clients are demonstrating that diversity is a top priority. Therefore, law firms that in the best case scenario are seen as extensions of that in-house team, must be able to further reinforce that.
Diversity and inclusion is near and dear to me, because I am part of the LGBTQIA+ community. I didn’t come out of the closet because I was never in there, and although I was very private in the early years of my career, I never tried to be someone that I wasn’t.
However, in the traditional financial markets, I felt a lot of anxiety for many, many years. I felt that because of my sexual orientation there was a limit to my success, to how far I could go in the corporate structure, because I couldn’t see anyone in senior leadership positions that I could relate to, no one was out in that particular industry in Brazil. I used to hear minor aggressions almost every day, jokes that I thought I had to live with. Although I put a lot of effort into my career and working was such an important pillar of my life, I believed for many years that my personal situation was a ‘ceiling’.
Part of a movement
In 2012, I went to work at HSBC. It was my first leadership position; I was hired there to lead a team of 12 people and be responsible for the legal advice for many parts of the business. And there I started to see that maybe those limits or those restrictions were more in my mind than out there. I started to see a movement of people being themselves about their sexual orientation, people being able to introduce their partners in social events, and even getting educated about how the bank in the UK dealt with this internally. I started to think that maybe it could be a good thing, I could even be part of a movement and talk about an experience that, for me, was very difficult before.
I was still very private at that point; I didn’t talk about my personal life at all at work. But I felt that people welcomed that, maybe people didn’t care, which was great. And the structure of the organization even gave people incentives to get involved in ERG groups, affinity groups, the Pride group, and so on.
In 2015, I started to be very involved in D&I groups and discussions in Latin America, where it’s much more challenging than in the UK, Europe or the US. I realized I could use my voice from my place of professional success to tell others that they should feel safe. At least, in that organization, I felt that this was true. I lived in Argentina for a couple of years, and there I was the first executive sponsor of a Pride group who was also a member of the group. We launched the Pride Committee in Argentina – a country that is open from the legal side, much more open than Brazil, but society is not necessarily the same.
An OUTstanding leader
Because of that work, I decided to join panels to talk about it and, in 2017, I was the first Latin American named in the Financial Times list of 100 OUTstanding LGBT leaders and allies. This came as a huge responsibility for me because I was the first Latin American there. Today, we have others, which makes me very glad. I didn’t know it, but I think that was the validation I needed as a person: to really believe that I deserved to be where I was, separate from my personal situation, because sometimes I felt that I didn’t – that I didn’t fit. Because every time I was with my peers, I didn’t have stories to talk about children, the more traditional family type of talk, I always felt left out.
Since then, I have realized that the aspects of D&I I have had exposure to are very limited. Although I am a gay man, I am white, I am cis and I come from a family that gave me all the opportunities for success – to go to the best schools, to learn English, to live abroad. So I refreshed the way I am working in relation to D&I. Two or three years ago, I started to get educated about racial justice, something that I’m very committed to get educated about in a system that is purely made for the success of white people.
Now I’m putting myself in the humble position of getting educated about how I can get exposure to diversity in my country that is very different from my reality. I’m not diminishing whatever challenges I had to face, but I’ve just realized that I cannot stop here, that I need to go much further as a leader – correct some injustices, broaden the access of opportunities in law schools and in our legal departments to people that have never had them before.
In terms of my personal experience, I had this first wave, where I could say ‘Ok, I’m here’. But I felt I needed to be that role model – a gay guy who speaks many languages, who has travelled the world, etc. The financial industry likes gay people, but they like those role models that look perfect, which I am not! And also it’s from a static point of view – you can be out, but you do not be an activist.
The importance of being yourself
At Nubank, I think I have achieved the true opportunity to be myself. Since feeling more able to be open about my personal life, I feel happier. I think that’s the easiest way to put it. I feel lighter. I feel that I don’t need to hide the type of music that I like, the type of films that I watch, the places that I go. I feel I don’t need to hide that I’m a sensitive person, that I cry sometimes. I feel that I can make comments with my team that I make with my friends, that I had to hide at work previously. And I think I am getting closer to people in my team and in other teams.
I was able to be a very good performer before, but at a cost – anxiety, even moments of depression, many times. I think the main thing about being able to be open is in terms of mental health and happiness. I don’t talk often about my personal life because I’m still private. But I’m me. I don’t feel ashamed anymore whenever it’s appropriate to talk about those things. So, it’s fresh working at Nubank in this sense.
Setting the agenda
At Nubank, I think that the agenda is very genuine. The teams are growing diverse, and we have very ambitious goals to increase this diversity over time. I have worked in US companies, British companies and Brazilian companies before, but there has been nothing really like the diversity we have in Nubank. The dedication of the senior leadership and the amazing D&I professionals from different backgrounds are really inspiring.
We have been involved in many initiatives that aim to promote entrepreneurship from the black communities. There is an investment program called Semente Preta (‘Black Seed’) funding start-ups that are being created and led by black professionals. We have invested funds in many of those start-ups that we will continue to follow, give mentorship to and ensure they have the right opportunities to grow their new businesses.
Salvador is the capital of Bahia, one of the states in Brazil which has a large black community. It’s very important in the landscape of Brazil, so we have opened a lab there focusing on those communities to foster innovation, and we also have ‘Nubankers’ working from there.
Mobilising the legal community
As a legal team at Nubank, we are working with legal teams in other companies to join efforts to foster social and racial diversity in the legal community. Nubank has given us the platform to go out there and say: we need to unite ourselves for broader actions and initiatives in terms of racial justice and diversity in the legal community.
I think there’s a huge potential for the legal community to be more diverse, and because a legal team within a company is not the core business, our teams are not that large, we have fewer opportunities outside the context of the business.
But, internally, we can help with our knowledge to be sure that we have the right policies in place, we support other areas to ensure that whatever decision we make is not discriminatory in terms of clients, and that any language that we use in our marketing is also adequate. So I think we do have the knowledge to help with D&I initiatives. Every single initiative coming from both the D&I and the ESG teams is supported by us in legal, and we have to ensure that we comply with the laws and best practices. Especially when you start sponsoring projects, you have agreements, you have many legislations that you have to comply with. And Nubank is so dedicated to it that just in being part of this huge community, you are involved in D&I discussions every day.
There are many arguments for diversity and inclusion in corporations. From an HR perspective, you want to attract and retain the best staff. From a marketing standpoint, it’s more creative if you have people from different backgrounds – the proposals, the brand, the advertisements will be much more interesting. From a commercial standpoint, if you have a team that is diverse, clients will see themselves in you, so you create this relatability between clients and the people that form your company. From a legal perspective, you need to treat everyone equally; you need to have a very strong culture in terms of respect.
All of this makes sense. We have many reports available showing that diverse companies are more sustainable, long-term profits, results, etc. But, for me, it’s because it’s the right thing to do. If your goal is to see a society that is more equal, more just, fairer, why not start doing it with your own company? Because, doing that, I think you will inspire people who perhaps never thought about diversity, multiplying and inspiring others outside the company. If you want to have a company that leaves a legacy in society, and perhaps influences society, that has the same goals as you would like to see, that’s where you can do it.
Three years ago, I was discussing how the insurance sector was behind in terms of D&I with three company lawyers who were senior managers in legal departments (Ana Paula de Almeida Santos and Vera Carvalho Pinto). We decided to create Idis, an institute to improve that, so we gathered some volunteers, and we work on awareness, we do events and training and we help companies to implement their D&I programs.
Nowadays, we work across five pillars: gender, focusing on women; LGBTQIA+; race and ethnicity; generations, focusing on people above 50; and people with disabilities. All the leaders have experience in that area of diversity.
But I want to create a pillar about other areas of diversity, as well. We work a lot on the traditional pillars for D&I because we still have a lot to do. But there are many other biases that people have, and we need to at least make them aware that this can prevent some people truly contributing to the company. For example, I talk a lot nowadays about ‘fat phobia’, because some companies don’t hire overweight people. They think they are slow, or they are lazy. But actually, when we do very intellectual work, such as in financial markets, we are not running a marathon!
Finding your cause
We now have 35 volunteers, and the companies sponsor us. It has been quite a journey – very rewarding. I believe in voluntary work because it’s important to dedicate yourself to something bigger. It’s not about forcing anyone to engage in any voluntary work – I always say, for example, if the company had a program of “let’s do exercise, let’s go biking”, I would not engage in that because it’s not my cup of tea, it’s not what sparkles for me. What makes me willing to engage is D&I or social responsibility or environmental issues. This sparkles for me. If the company offers employees some possibilities for voluntary work, this creates more loyalty to the company, because even if I receive an offer from another company, I will not go because I will lose that part of my life that is important to me.
For my personal development it has also been great because I am learning to lead by influence, not by power. My team knows (even though I don’t tell them) that I will evaluate them and I can dismiss them. But when you lead an organization of volunteers, it’s all about influencing, recognition and supporting. For me personally it has been quite a journey. All of them are very much engaged and I’m proud of this thing – it’s probably the best thing I ever had in my life.
We all went to law school searching for Justice with a capital J, and D&I for me is a matter of Justice more than anything, and of respect. I think legal departments have a key role in diversity and inclusion, because we search for Justice.
Influence in action
Secondly, we are consulted about everything, including internal policies. When you are looking at a hiring policy for example, you can influence to have more rules about D&I. I’ll give you an example. If you are hiring a new lawyer, you can ask for résumés of both genders. I’m not saying that you must hire a woman, but at least you have to interview a woman. And you can try to have blind interviews, not knowing if it’s a woman or a man. When interviewing someone, I try to not open the camera – I say let’s talk by phone, because then I will not look at the person. If the person is good-looking or not good-looking, if they are black or white, I will not see.
Everybody has biases. Everybody. So, first of all, we need to be aware of our biases, and secondly, we need to try to avoid our biases. I was talking with a general counsel before the pandemic and there was a very important congress in that country, where it was a form of recognition to send someone to participate in the congress. I said to him, “What about this lady?” And he said to me, “Oh no, she has a baby, I think she won’t go, even if I give her this recognition.” And I said, “Did you ask her?” “No, I didn’t.” “So you ask her. Because whether she will go and leave the baby at home, or go and take the baby with her, it’s her decision, not yours. So if she deserves to receive this recognition, the mere fact that she has a baby is not something you need to take into account.”
We need to be vigilant. This is the point. If you are in a meeting and someone cracks a joke or makes a comment that’s offensive to any person – even if there is no one of that group there in the meeting – you need to point it out. You need to educate people. This is something that has changed over time and, I must tell you, for me it has been a journey as well. Many years ago, I would not be concerned about that. But now, I am a different person.
What corporate lawyers, more than anyone, need to be conscious of, is that we are not there to be popular. We are not there to be friends of everybody. We are there to be the annoying person that tells the truth. We need to point it out when someone is wrong, when they are going down a path that’s not the correct one. It’s our mission, including about D&I. It’s not only about law, it’s about ethics – and D&I is part of ethics.
Closing the gap
In Brazil we have economic inequality which is very much connected to ethnicity. Brazil was the last country in Latin America to abolish slavery and even nowadays, in Brazil, to be Black is almost to be poor. So, when you have a proactive action to have more Black people in your company, you need to close the gap. You don’t demand a first-league university, you don’t demand English is used, you don’t demand the full package in terms of knowledge. You need to hire people and close the gap.
It’s the same for people with disabilities. In Brazil, there is a law requiring companies to have a percentage of their employees with disabilities, and the spirit of the law is that the companies help to close the gap of those people – sometimes, perhaps, they could not go to a particular school for example. So, the company will hire them and give training to them. But, often, the companies are not so eager to do that. But big companies have a responsibility, and legal departments have to influence in this direction.
If I can work 10 years more in diversity and inclusion, I will work. I believe this will be my legacy. More than making money and have wealth, I need to leave something behind. I will be happy when 56% of all people in companies in Brazil, including senior management, are Black people. I will be happy when 50% of the senior management of companies are women. And I will be very happy when an LGBT person does not have to hide their sexual orientation, because then we will have a truly respectful environment. I will be happy if a person above 60 is still valued as a good asset to the company, who can contribute with their experience. I will be happy if companies truly develop people with disabilities. 15 years ago, I was at another company, and I had a deaf person in my team. But I was not prepared, I was not trained to deal with that person. I was not taught sign language, nothing. I didn’t know how to manage that person. I believe that companies have to train managers how to deal with people with disabilities.
Paying gratitude forward
So, we have a long way to go. I know during my lifetime this won’t change. But I have the dream of developing at least my sector, the insurance sector, a little bit. Nobody in university has ever said, ‘I will work for an insurance company!’ But insurance is very challenging, you get to know qualified people, it’s a good work environment, and I would like to make the insurance sector more attractive to young people. So they look at the insurance sector and say, ‘Look how many good things they are doing in terms of D&I, the environment, wellbeing, and other initiatives. I would like to work for the insurance sector.’ I am very grateful to the insurance sector. I have had many opportunities in it, and I want to leave something good behind to the sector.
When I was younger, I used to work in companies that were majority male or participate in groups where I was the only woman. At the time, I didn’t realize the difficulty I had in expressing my ideas or my thoughts. I didn’t feel I could talk, because I would be the different one, and I wanted to fit in, so I used to try to talk and act and think the same as the rest of the group.
Now, looking backwards and with experience, I can see how many opportunities I lost because of that. And how many opportunities the companies lost to have a different perspective, an approach that could be more effective, or a better discussion – if I had just mentioned ‘that idea’, if I had just opposed ‘that concept’, it would have been much, much richer, I would have been happier.
Nowadays I feel much more empowered, and I perceive the women around me to be much more empowered and engaged. They are open to voice their problems and thoughts, domestic or professional. It’s ok to be yourself, and not spend energy trying to be something else.
One experience that struck me in the past was coming back from maternity leave. That was a real tipping point for me – I think coming back from maternity leave is always very impactful for women, and for me it was not different. But when I got back, they didn’t have a place for me to take my milk to the baby, I had very difficult arrangements for getting to take the baby out of nursery. I was confused and insecure, and I didn’t have any support specifically for that. But at the same time, I didn’t feel secure to talk about it, because it could be understood as though I was not able to fully contribute.
I remember at that time there was an important project going on and it was a project that should have been assigned to me, because it fit under my responsibility. But the group that was negotiating the contract asked my manager to put someone else on it, because I had a small baby. Nobody asked me if I could do it; they just assigned it to another person. And I didn’t oppose. It was very frustrating. But my leader did oppose it, and assigned it to me, after checking with me, and she also offered her support.
I remember the first day we met with the client of this project. We were discussing the agenda, and I was vocal in saying, ‘I have to leave at this time because I have to collect my baby from nursery.’ My colleagues looked at me angrily, because I was supposed to be 24/7 with the customer.
But the customer looked at me and said, ‘Great, I also have a kid and I want to be home early to meet with him, so the meeting will be finished by that time.’
And that happened every day – he was the one calling off the meeting. I thought, ‘Oh my god, I just had to say it.’ Needless to say, the project finished in a timely manner, and was a success.
There had been no impact resulting from our agreed agenda – on the contrary, we ended up being very effective during the meetings, as we had a daily deadline.
Learning to use your voice
That was one example that made me realize that most women don’t talk, and that we have a lack of women in leadership teams. So, I wanted to try to create these groups. At Monsanto, I supported the creation of a group called ‘Women Network’, a project resulting from a leadership training that aimed at fostering women’s careers. It evolved, it changed, got engagement at a global level and is the Business Resource Group (BRG) for gender equality, which I’m the ambassador for in Brazil.
At Bayer, there is great awareness and commitment to inclusion and diversity. In Brazil, we have a diversity and inclusion steering committee formed by senior leadership. HR broadly coordinates the agendas, budget, initiatives and trainings, and coordinates the five different business resource groups: the one I sponsor is for gender equality, race, people with disabilities, LGBTQIA+ and generations. Each group has a sponsor, two co-leaders, and is formed by volunteers who dedicate time for activities to promote awareness and engagement related to their specific group, as well as intersectionality. We have one or two members of the Brazil law department in each of these BRGs. Globally, the legal department created an I&D (inclusion and diversity) committee that will support the leadership team in the inclusion agenda, among other actions.
Over the past three years, my group has focused on different aspects of gender equality, such as initiatives to be supportive to make it less likely for women to leave when they have kids, foster women careers by empowering them, acting in specific actions for different business or functions, as demographics show the need. For instance, one of the biggest business areas
in Brazil is agriculture, and data showed we have few women in the sales team, so we thought about and promoted actions that can help identify opportunities for them to progress in their careers.
Last year, we launched a tool for contributors to denounce domestic violence, which also provided support to the victims of said violence. It started with the pandemic, when we realized that the number of cases had increased tremendously in Brazil, and across the world. We partnered with a specialized company to offer that tool, and professional support for the women. We have also just launched a project to fight harassment in the workplace, which consists of enhancing the awareness about what is not tolerated, and creating a network to listen and support colleagues who experience harassment.
Another current focus is on intersectionality. Our BRG focuses on gender equality, but we are working together with the other groups to promote inclusion in a broader sense, so that we don’t talk about ‘women’, but ‘all women’: black women, transgender, those with disabilities, and of all ages.
We also have programs for mentoring suppliers to implement efficient inclusion and diversity policies. In the legal department, for instance, it is a requirement for the law firms to provide data to confirm diversity in the teams. Having effective I&D policies is a differential for hiring law firms in Brazil.
Tone at the top – and the bottom
At Bayer overall, and in Brazil in particular, I think that we have done a tremendous job in improving I&D culture; it’s a company value, and is part of our DNA. Although there’s a lot to be accomplished, we live our awareness and values, and people are really engaged and intentionally more open and inclusive.
It’s a global movement, as Bayer’s headquarters announced last year our global commitment to I&D, which, among other things, is to have half of the leadership occupied by women by 2030. Maybe that sounds like just a number, but it’s an implicit message for all that shows we are on the right path for fostering I&D.
Now that the awareness has been created, there is more consciousness, and also demands from the bottom up. As an example, we have a recurring program for trainees where we welcome and accelerate talent that will be in the pipeline for leadership. At the beginning of last year, we launched a program dedicated exclusively to black people. We received a lot of applause, criticism and threats from the media, but internally it was so well received. The employees were very supportive of the need for creating these opportunities, and were proud of this initiative. Another important aspect of this case is that it shows how the leadership have embraced and supported this concept, as the original idea came from a group of employees, and, at the end, the support came from employees all over the company.
The legal team
In Brazil, we have a legal team that is majority women, and we have representatives of other minority groups, although we currently lack black employees. We recently had an open position and we required of the talent acquisition team that at least half of the candidates on the shortlist should be black, and preferably women. First, the notice was in English, which we have reviewed: we can be flexible on that and then provide English classes. If we want talent, we have to be intentional, as the best lawyer could be a person that hasn’t had the opportunity to attend English classes or study abroad.
Every quarter, we have a meeting with the whole legal team and, in all these meetings, we bring someone from the I&D community to talk to us. We started welcoming the HR I&D manager to walk us through the I&D strategy and to share demographics, then we brought in members of the other BRGs groups to enhance our awareness and to enlighten us about their initiatives and how we can support them.
To me, diversity and inclusion means the possibility for anyone to have the opportunity to participate, or to make an improvement in, their career on an equal basis with anyone else.
I belong to a percentage of the population that could do that – I am at director level after a long career of 25 years – but the conditions that we had to accept at the start of our careers are quite different to those we are trying to achieve nowadays. For example, if I had to go to an interview 20 years ago, I was compelled to wear a skirt: I remember that in my first interview as a junior associate. And nowadays, when I hire someone, I don’t care if that person has put on their résumé that they’re a man, or a woman or whatever.
Follow the rules
I think that certain practices regarding diversity have to be implemented with rules so that change can work. While we’re still talking about the idea, nothing will change. And I think that for my team to comply with this goal, and with my beliefs, I need to directly set some rules considering diversity.
Last year, Argentina passed legislation compelling public sector companies to give 1% of positions to transgender people. If you’re a private company and you achieve that 1%, you have certain tax benefits.
But last year, the Public Registry of the City of Buenos Aires (PR) tried to compel organizations to give at least 50% of board seats to women, but that regulation was attacked by certain private associations and the resolution was struck down.
There is certain view held within the corporate landscape that says, ‘ok, we can have a good corporate governance program, and let me do my job, let me decide who I want and when I want certain changes to my board or management level or key officers – but do not impose that through a law. I don’t want to reject a man just because a law says I have to comply with giving 50% of seats to women’. That’s the discussion that has been set for bills regarding quotas today in Argentina, and we are expecting to see what can be done.
In summary, we are not in the top countries for prioritizing diversity in Latin America. We are trying to improve this, but the private sector is not convinced.
Using that seat at the table
I’m a member of the Argentine Chapter of Women Corporate Directors (WCD). This is an international association, with chapters around the world, where women that have certain board seats in listed companies, have meetings and offer job opportunities to other women at any point of the corporate ladder. For instance, if a company in England needs someone bilingual who has expertise in the energy sector, WCD shares information around the world, and the search starts between us to find résumés.
In addition to that, since I am a member of the board of the Buenos Aires Stock Exchange, and a trustee of Caja de Valores S.A., I participate in certain meetings with the government and try to participate in the development of legislation concerning all of this stuff.
I arrived at Edenor in July 2021, so I have only been here for six months, and one of my goals was to work on our new corporate governance code, including specifically a chapter on diversity. Likewise, we are working on a sustainable bond to be launched probably in 2022, and one of the measures of the sustainable bond will be diversity.
Previously, Edenor didn’t have any key officers as women, and now, out of ten at the table, there are three women. Any vacant role at the company has to be opened with at least three candidates and at least one should be a woman.
The most difficult part of this is with engineers. We have an industry where it is so difficult to find electrical engineers, and it’s even more difficult to find electrical engineers who are women. So we are working with certain universities to provide seminars, trying to seek women that could be interested in exploring the energy sector. We have a program that we call ‘Women in Edenor’, and in that program we try to focus on including more women in the company at the different levels we seek. My team is comprised of 100 people and 65% are women. For any new lawyer or student that would like to work with us, I follow the three résumé rules, and that one of these should be a woman.
I think that in-house lawyers can play a significant role in driving diversity and inclusion, because when you work at a listed company, you have a lot of opportunities, through complying, for example, with the rules of the SEC, or the London Stock Exchange, which helps you to have a significant role in diversity decisions throughout the company.
At Zoetis, we have an internal Colleague Resource Group (CRG) called WAVES – Women Achieving Vision, Excellence and Success. I am a board member of this group, and the idea is to empower women inside the company for leadership positions and create awareness of women and our roles. We have a female CEO, a female general counsel, and I was promoted as chief counsel recently, but, generally speaking, there are still some regions, especially in Latin America, where we could do more. So, our mission is to increase representation of women at the director level and above to 40% by 2025. How will we be able to achieve this with a CRG? If we help each other, empower each other, and also with a mentoring program.
I’m a mentor inside Zoetis and outside as well. I really like to mentor women, because in general, what I see is lack of confidence about our talent. In Brazil, and in Latin America as well, since we are born, we learn that men are strong, men are capable of doing more. And then we grow up with this bias: they are better than me.
I do pro bono mentoring every Wednesday night for young women up until the age of 26. Most of them suffer from lack of confidence; because society is created in such a way that they don’t believe in themselves. That happened with me in my career – I know that, on certain occasions, when a bigger position was offered, the first reaction I had was: am I good enough for this position? But if the position was offered, of course I was.
So that’s why it is important for women to support other women, so that we create more confidence among ourselves, and we speak up. One of the things that I notice a lot is that women often don’t speak up. We don’t ask for a salary increase. We think: I’m going to leave, I’m going to be on maternity leave, I’m so afraid. No. This is your right.
I am part of a Brazil-based diversity and inclusion group at Zoetis, and one of the things that I think about is that, ‘ok, we are all diverse, but how do we include that diversity on a day-to-day basis?’
Sharing stories
For example, if we launch online training, sometimes I have the feeling that people join the training just to check the box – but they don’t think about what it really means. So, what I like is the storytelling approach.
For instance, in our D&I group, there was a person who was legally registered as a girl at birth, but did not recognize this gender, discovering himself to be a trans man. From the beginning, he raised a hand and said my name is a ‘she’, but I recognize myself as a ‘he’. Last week, I got very emotional because I saw his new birth certificate with the gender changed, and I know that this is a victory. I worked on the legal side to change all the labor paperwork, and I was so emotional, so happy, because I know the story, I know everything that he went through.
He shared his story so the entire company knows a little bit of what he faced during this journey inside Zoetis. This is what diversity and inclusion is.
I also sit on the Global Council for Diversity and Inclusion in the company, which is a group of people from different countries, and the idea is to talk about D&I inside Zoetis. We created CRGs. We are launching online training to the entire company. We created the ‘macro’ road map, and now we are starting to work on different fronts.
Of course, there are lots of things to do, but I’m very happy to work in a company that is taking diversity and inclusion very seriously and creating awareness and discussion about such important topics. It’s not just a box to check. And the thing is that if we create an environment where people feel safe, secure and comfortable enough that they can be what they want to be, people will share new ideas. At the end of the day, we will bring more value to the shareholders. This is so simple. But we never talked about this in the way that we are talking today, ten years ago.
Diversity and inclusion is in the CEO’s agenda, so each department has a goal, or something, with regard to D&I. So when you cascade down, it goes to business leaders, and it goes to legal as well.
Opening up to talent
In legal, when we talk about talent, D&I is something that we take into consideration. Most of the time, when I see an open position for a lawyer in Brazil, I see that fluent English is mandatory, fluent Spanish is mandatory and you must have a degree from a certain university. We need to change that.
Because if I have an open position, and I say we need somebody from something similar to an Ivy League university, or someone with English and Spanish, who would I be interviewing? Just white people. If I put all this as mandatory during the hiring process, I could not take into consideration a lot of good and diverse talent. So, if I have an open position, the university doesn’t matter. As long as they are competent, I don’t care. I don’t care if they have fluency in English, in Spanish, or whatever, this is something that they can learn during the journey. I need to take into consideration that people will only have money to pay for English classes after they have a salary and can invest their money on that kind of thing. If I am so restricted during the hiring process, I would not bring diverse talent into my organization.
Lawyers in skirts
I am a member of Jurídico de Saias (‘Lawyers in Skirts’). The main purpose of this group is that we help each other, we exchange ideas (considering confidentiality) between ourselves, and we support each other. It started very small and it’s bigger now. As part of that, we created a mentoring program: I am a mentor of another (what we call) ‘skirt’ – another in-house lady – and the idea is to support and help the other lawyer to grow inside her company.
We also have a live, monthly event for subscribers on Instagram, where we talk about a subject, for example, leadership or compliance. On one occasion, I interviewed another lawyer who was an expert on a particular topic.
Through Jurídico de Saias, I began to learn the concept of helping other women, and then I started to replicate this during my pro bono mentoring sessions and in my mentoring program at Zoetis. And that’s the main purpose – because if I learn something during my process, it is great if I can share those learnings with another woman.
Being an influencer
At the end of the day, an in-house lawyer is a business partner and, by being a business partner, we play an important role. I not only advise on legal aspects but also on general aspects. And legal has an important seat at the table: we have the ability to influence the leaders, to influence the organization. Everybody listens to us, we add value, and we should take advantage of that and talk about diversity and inclusion and include that in the agenda.
Being a business partner, I can advise the team to not sign a certain contract, for example, or to do certain things for the company. I can say, oh why don’t we invest this in marketing and also how is the hiring process? How many women do we have in leadership positions in the country? The beauty of being the in-house lawyer is that we can influence the entire organization.
Even before the Covid-19 pandemic altered businesses and society, the environmental, social and governance (ESG) movement was gaining steam within corporate circles. Issues of climate change, consumer pressure, regulatory reform and social movements, were top of mind for investors and executives.
The global pandemic only further heightened the awareness around ESG, and the social impact of severe lockdowns and business instability forced companies to rethink their priorities. As a result, ESG issues such as environmental sustainability, social justice, and emerging reporting disclosure protocols have dominated corporate news headlines around the world.
ESG reporting has been voluntary in many countries, but in the last 12 months the EU – along with many other national governments and regulatory bodies – have issued ESG reporting guidelines. As the move towards establishing a common reporting standard around ESG continues, corporate counsel have been tasked with implementing effective protocols and oversight.
GC partnered with Irwin Mitchell to gauge the ESG outlook of leading corporate counsel across Europe and the United States. With the 26th UN Climate Change Conference (COP26) taking place in the United Kingdom from 31st October to 12th November 2021, the ESG agenda has been cemented as a business imperative for general counsel. This research documents the thoughts and opinions of more than 190 in-house lawyers on ESG, their risk outlook, and how a shift in business focus has shaped their legal agenda.
In-House Legal Research Team
GC magazine
Irwin Mitchell Comment
Irwin Mitchell is determined to become a leading responsible business. We’re already on a journey to ensure that our environmental, social and governance values are embedded into our business and influence our relationships, strategies and aspirations. But to be truly successful, we need to proactively engage in conversation and collaboration; with our colleagues, with our clients, within our business and geographic communities, and, setting commercial competition aside, with our peers across the legal sector. In doing that, we believe our aspirations will be realised and we will lead as a responsible business. We’re delighted that so many in-house counsel contributed to this research, and I’d like to thank them for their time and for sharing their insights into the role of in-house in setting and supporting the ESG agenda within their businesses. We hope that you’ll find this research useful in plotting where you, your team and your business are on your own ESG journey, and where it will take you next.’
As pressure for sustainable and ethical corporate practices from regulators, investors and consumers mounts, ESG has become the most pressing topic in the boardroom.
From our research, a staggering 96% of corporate counsel reported that their companies have either implemented a formal ESG plan or are in the process of developing one. While this focus is not new, treating ESG as a crucial component of the business and governance framework has increased in recent years.
GCs are placed in a unique position to take the lead, and influence company policy. Increased focus from regulators has been one key driver, explains a survey respondent: ‘ESG has become the main focus of regulators and certain key players in the financial sector. The fact that these players promote ESG best practices means that other market participants should make ESG a priority to keep up with the best practices and improve the chances of better financial return in the longer run.’
Before the pandemic, ESG reporting was a nice-to-have niche. But 2020 saw several major regulatory developments from the European Union:
The Sustainability-Related Disclosure Regulation (SFDR) lays down the ground rules for financial markets on transparency
The Corporate Sustainability Reporting Directive sets out legislative goals
The Taxonomy Regulation (TR) defines what is regarded as sustainable.
Meanwhile, in the United States, although there are no mandatory ESG disclosure requirements, the Biden administration has declared its intentions to make sustainability a priority. In 2021, the House of Representatives passed the ESG Disclosure Simplification Act, requiring public companies to make ESG disclosures in their Securities and Exchange Commission (SEC) filings.
Does your company have an ESG plan?
Echoing this sentiment, the UK government has also indicated its intentions to introduce its own mandatory ESG reporting requirements. Currently, there is no single over-arching ESG regulation, but rather a disparate array of regulations that touch on ESG concerns. The Corporate Governance Code 2018, Companies Act 2006 and the Disclosure Guidance Transparency Rules all set out the current ESG disclosure regulations.
The fragmented legal policies around ESG, and the regulatory notices governments have put forward, signal to lawyers and businesses that a unified ESG framework is in development.
One respondent from the financial sector explained: ‘There is a much greater focus in the regulatory sphere when it comes to ESG. Covid-19 has accelerated this interest and legal teams will play a key role in managing these changes.’
Irwin Mitchell Comment
‘Although there is currently no global standard for ESG reporting, there is a huge range of legal reporting requirements for businesses. In the UK alone there is a wide variety of existing and incoming legislation that involves important elements of ESG reporting such as gender pay gap reporting and modern slavery statements. In addition, we believe that some of the confusion around current ESG reporting obligations has arisen from the fragmented reporting framework that places obligations on companies depending on their size (rules for large undertakings under section 172 and 414 Companies Act), whether they are listed (arising from the Disclosure Transparency Rules and UK Governance Code) and whether they are in the regulated financial services sector (Prospectus regulations, Disclosure Guidance and Transparency Rules and Market Abuse Regulations).
The current reporting requirements are disparate and can be difficult to navigate. It’s clear that in-house counsel will play a crucial role in guiding businesses through their approach to ESG and how ESG performance is measured and reported both now and as harmonised ESG reporting obligations are introduced. As standardised reporting is introduced, we are likely to see the introduction of financial penalties for non-reporting or false reporting and in-house counsel will become even more important in bringing key ESG stakeholders together to make reasoned and justified decisions to allow effective reporting and compliance’.
Jason Newall, Senior Associate Solicitor, Regulatory and Crime
Ignore at your own peril
Whilst regulators work towards legislating ESG obligations, our survey results highlighted that companies have already started prioritising key areas.
Unsurprisingly, it was reported that 42% of ESG plans contained a governance framework. This was closely followed by plans containing published policies and guidelines, identification of ESG related risks, a named senior management sponsor, and KPI monitoring and reporting. Lower on the agenda was identification of ES-related opportunities and setting SMART objectives. In fact, it was alarming to note that almost 90% of respondents failed to take into account all of the above when considering their own ESG framework.
Given the increasing importance of ESG initiatives, responsibility still lies with a relatively small group of people. In 57% of the cases, ESG strategy was led by one or no people, with the majority (83%) of those individuals reporting to either their CEO or CLO. A GC from the transport industry commented: ‘Depending on ESG strategies and targets, the responsibility should lie either with the Chief Executive Officer’s or the Chief Legal Officer’s department.’
When survey respondents were asked what areas they believed needed more investment to improve ESG oversight, 31% indicated the need to invest in a dedicated ESG team. This is reflective of the upward trend of companies creating new ESG-specific roles.
While 26% of respondents pointed to the ability of their organisations to continue operating in increasingly difficult conditions as a significant environmental concern, a larger number of GCs said that issues not directly tied to their organisations’ market performance were top priorities. This included, 31% or respondents saying they wanted to see greater investment in efforts to improve biodiversity or tackle pollution, and 38% saying resource use and the so-called circular economy was their biggest concern.
It is also clear that social issues are now deemed to be risk items relevant to the legal team. While issues such as working conditions or health and safety have long been a potential matter for the legal team, respondents were just as likely to see diversity and inclusion as an area needing their oversight.
What does your company’s ESG plan include?
The growing importance of new types of risk is even shaping GCs’ views on corporate governance. While the staples of fraud, bribery and corruption emerged as pressing concerns, just as many respondents said they wanted to see greater attention to corporate transparency.
Even five years ago, few general counsel would have felt that their role called for ensuring fair operating practices or scrutinising executive pay and boardroom diversity. Now they are seen as key areas of risk.
Nevertheless, legal departments are still expected to play a crucial part in setting the ESG agenda — although other business functions may share responsibility. As one respondent explained: ‘I think it should be sponsored at the highest level but that responsibility should sit across all staff and not just a specific team.’
Another survey participant said that spreading ESG accountability across numerous company functions would lead to better outcomes: ‘Different elements of ESG should have different owners,’ explained an in-house lawyer from the tech industry.
‘ESG should address all stakeholders and touch on all areas of a company’s business. Shared responsibility is especially important given the breadth of topics (operational/facilities, HR and Legal).’
ESG in more detail: where do GCs think investment is needed to improve oversight?
Environmental
Social
Governance
Avoiding pitfalls
General counsel play a unique role as the gatekeepers of good corporate practices and ethical considerations.
As guardians for disclosure controls, company litigation strategy and company compliance practices, ESG certainly falls within the corporate counsel remit. Our data reflected this with 63% of respondents reporting that they believe in-house legal teams play a ‘very significant’ or ‘significant’ role in ESG activities.
When asked in what way in-house legal teams are involved in ESG initiatives, 59% of respondents agreed that they contributed to the development and/or evolution of the ESG plan. Whilst 18% said they were involved in the creation and implementation of policies and their adoptions. Those who selected ‘other’ mainly focused on specific parts of the ESG agenda.
As the sustainability movement grows within the corporate community, GCs are not only important legal advisors to the companies they serve, they are crucial strategic partners. So as the trend towards ESG accelerates, having a broad grasp of the wide extent of its impact has never been more important.
Legal teams have become fully involved in ESG-related matters: analysing risks, developing ESG strategy and working on governance-related issues,’ shares a respondent.
In what way are you or your team involved in ESG activities?
Irwin Mitchell Comment
‘The in-house legal team’s role is to ‘help their business do “it” right’ – the “it” being sustainable, successful and compliant business.
ESG is now all pervasive – in the supply to the business, in the supply from the business, in the stakeholder and regulator expectations of the business and, increasingly, in colleague expectations of their employer. So getting ESG right is now at the heart of helping the business to get “it” right overall.
And the key to ESG is the G – the Governance. Contractual, regulatory, processes and policies allow you to document and deliver all the ES things your suppliers and customers want you to commit to.
In-house counsel owns G. Getting G right helps the business get its ESG right. That’s now a core part of in-house helping their employer get “it” right overall.’
Bruce McMillan, General Counsel
The need to focus
Although governance oversight is essential for corporate counsel, it is interesting to note that GCs are placed in a unique position to take the lead, and influence company policy. As a result of the regulatory push towards sustainably conscious guidelines, ESG has become an essential part of influencing investment decisions.
According to the data collected, a total of 92% of survey participants shared that they had either completely, or to some extent integrated ESG into their companies’ investment decision making process.
For this reason, it was no surprise to see this shift in investment sentiment influence GCs to realign their legal objectives. When in-house counsel were asked what their company’s top motivation was for investing in ESG, just under half of respondents (47%) said improving long-term returns. The second highest motivation was ‘doing the right thing’ (12%) followed by ‘environmental sustainability and resilience’ (11%).
Explaining the motivation behind focusing on ESG initiatives, one survey respondent explained: ‘an increased interest from the public about ESG will drive many more companies towards the adoption of ESG practices.’
Does your business integrate ESG criteria into investment decision-making?
Irwin Mitchell Comment
‘The G in ESG is becoming increasingly more important for businesses in the funds and investments space; aligning how you operate your own business with your external ESG messaging is crucial. The impetus for businesses to build ESG into their investment decision making is driven partly by the introduction of new regulation and partly by the growing appetite and demand from stakeholders, whether they be shareholders, investors or customers. Post Brexit the UK has not ‘onshored’ the EU Sustainable Finance Disclosure Regulation (SFDR) into UK domestic law, opting instead to make disclosures that are aligned with the Task Force on Climate related Financial Disclosures (TCFD) fully mandatory by 2025 but there is a general view that it still has a number of indirect/practical implications for funds and investment related businesses in the UK given the UK’s Green Finance Strategy and the fact that ESG considerations will become integral to future EU trade deals and the ability to attract international capital.’
Sean Scott, Partner, Banking and Finance
Risk appetite
Since the pandemic, ESG concerns have propelled to the top of the business risk agenda, and corporate counsel have taken notice.
When GCs were asked if they had incorporated ESG issues into their own risk and resilience plans, 85% reported that they had. This shows that corporate counsel understand that failure to address ESG matters have both reputational and financial risks.
‘ESG is transforming from being a reputational risk to becoming a legal risk. This is particularly obvious when we consider the close adoption of EU legislation in the field,’ explains a survey participant.
When it comes to determining ESG risk, GCs were asked what they believed fell wholly within the remit of their legal team. The threat of regulatory sanctions ranked at the top at 47%, with a further 16% of respondents selecting that this risk fell within the remit of their legal team. Other risk areas that ranked highly included the threat of litigation and corporate reputation.
With new legislative reform around ESG on the horizon, the risk for regulatory liability is an anticipated threat. However, the ESG outlook — if appropriately adopted — does present opportunity.
Which of the following risks fall within the remit of your legal team?
Generating goodwill from showcasing sustainable practices will go a long way with stakeholders. On the other hand, doing the opposite may lead to embarrassing disclosures triggering fallout with investors, employees and consumers.
The data collected is undeniably indicative of the pressures felt by in-house counsel to incorporate ESG into their risk and resilience plans. The pace at which regulatory changes are occurring are making some in-house counsel nervous. A GC from the finance sector explained: ‘From month to month, I can see that environmental issues and regulations are becoming more serious, visible and severe. Results, revenues, incomes and dividends are going to be pivotal when light is directed to them.’
So when it comes to risk, should companies be investing more? The majority of corporate counsel believe businesses should be investing more (68%). The question which then arises is, should this investment be directed at systems, people or knowledge and training? As the risk appetite shifts towards ESG, knowledge and training was considered the area in which investment was most required.
As business priorities shift, training teams to understand new legislative protocols is an important company investment. ‘The way of doing business in the future is transitioning and
the regulations are moving in a particular direction. Understanding this will be necessary to avoid legal risks,’ says
a survey respondent.
GCs are often the torch bearers of responsible conduct. When it comes to manging risk, in-house counsel are well placed to ensure adequate protocols and policies are developed and managed. As ESG becomes the new industry focus, our data highlights that in-house leaders are at the forefront of managing the risks and opportunities a new framework may provide.
Irwin Mitchell Comment
‘ESG is not just about risk management. It is about everything an organisation does and how it goes about doing it. Effective risk management is an essential mechanism for identifying and managing the risks across an organisation, so as to best avoid unnecessary problems and potential reputational damage.
‘In this context, identifying and defining the most relevant ESG risk factors for your organisation and incorporating them into your existing risk frameworks should be a priority.’
Georgie Collins, Partner, Intellectual Property and Media
Irwin Mitchell Comment
‘For two weeks in autumn 2021, the eyes of the world will be on Glasgow as it plays host to the UN Climate Change Conference (COP26). These talks will bring together heads of state, climate experts, leading businesses and campaigners to discuss a coordinated action plan to tackle climate change. Top of the agenda will be the urgency around net-zero commitments and the need for business transparency and accountability.
For the UK, we hope that these discussions will be the catalyst needed to bring the long awaited Environment Bill to fruition. This Bill introduces a green watchdog in the form of the Office of Environmental Protection, which is already taking cases in its interim function. We’re also waiting to hear more about the ‘strong and meaningful’ targets relating to the four priority areas: biodiversity, air quality, water and resource management. Although the target deadlines won’t kick in until sometime in the mid to late 2030s, in-house counsel will need to be alert to the interim targets which will be set to make sure progress is made sooner, rather than later. We can expect to hear more about this in the coming months and years.’
Claire Petricca-Riding, Partner and National Head of Planning and Environmental Law
Greener pastures
As the social and economic impacts of Covid-19 continue to play out on the global stage, 85% of corporate counsel believe ESG will remain a top priority for GCs in the future.
In recent months, the ESG movement has shifted from a non-essential requirement to a vital reporting standard for investors and other stakeholders. Nevertheless, ESG is still in its infancy, with forthcoming legislation on the horizon expected to unify reporting standards.
But for many GCs, there is an even more pressing reason to take these issues seriously: ‘The planet continues to face an existential threat, so ESG must remain a top priority. This will likely be driven by both regulatory (SEC) disclosure obligations and investor interest in sustainable businesses.’
Another survey respondent supported this sentiment by saying: ‘I anticipate we, as general counsel, will become more involved in unpacking the requirements of the various ESG initiatives and support reporting. I also anticipate that there will be an update to legal agreements as ESG becomes more legally binding over time.’
Although ESG reporting isn’t a legal requirement yet, most ESG plans currently enacted are based on feedback from employees (45%). Other important stakeholders include investors and customers who play a crucial role in shaping the current ESG outlook. Going forward, this will likely change as ESG reporting legislation is enacted.
‘In future, ESG issues will likely become more programmatic as consistent standards are developed to allow broader and quicker adoption,’ predicted one survey respondent.
The survey data also indicated that GCs expect their ESG outlook to increase with importance within the next five years, as reported by 88% of respondents. Although 12% believed ESG would retain the current level of importance, it’s vital to note not one respondent thought it would become less important.
The unanimous consensus regarding the future of ESG highlights that the way of doing business is evolving. Although responsibilities around ESG obligations may vary between sectors and jurisdictions, the pressure in-house counsel are feeling from regulators, consumers and employees is universal.
Pre-emptive reporting requirements are reshaping the corporate agenda, with general counsel set to oversee the application of non-financial reporting rules and governance. As policy momentum accelerates, ESG trends are set to raise the corporate profile of general counsel among organisations. With more companies feeling the need to launch more holistic programs, policies and reporting frameworks, one thing is clear, general counsel are pivotal in managing this new focus.
Irwin Mitchell Comment
‘Diversity and inclusion, as part of a wider ESG agenda, provides clear opportunities for those businesses ready to truly embrace it. D&I cannot be seen as a job for HR; as something that should be monitored and reported on but then forgotten. A strategic approach that is embraced by all leaders including GCs must be taken to embracing D&I on a day-to-day organisational basis. We have seen huge leaps forward by businesses who are paving the way including for example the creation of shadow boards or “reverse” mentoring programmes. These businesses are already reaping the rewards of these programmes and those businesses who have not started to properly engage with D&I as an agenda item risk falling behind.’
Awareness of cyber risk is increasingly catching the attention of boards of directors and senior executives. For Electronic Transaction Consultants (ETC), cybersecurity has been a top risk priority for a long time. As a leading provider of smart mobility solutions, including electronic tolling solutions, we manage back-office systems and roadside systems for many prominent state tollways. That means we are dealing with personally identifiable information, payment data and a range of other sensitive data that we need to keep secure.
Regardless of the sector a business operates in, I would argue that cybersecurity is now a primary risk. The frequency of attacks and the aggressiveness and skill of the threat actors perpetrating them has grown exponentially. Threat actors are hitting ever larger targets, and the widespread use of cryptocurrency has aided the ability of threat actors to obtain money. In the absence of national or global legislation that restricts the ability of companies to pay ransom, threat actors will always be able to find an opportunity. But it is worth remembering that most of this crime is opportunistic. From the threat actors’ perspective, cybercrime is a business – potentially a very lucrative one. For general counsel, reducing these opportunities is essential.
It behooves any GC to understand what protections they have in place and to test whether they are adequate in the current threat environment. Lawyers may not feel cutout for this, but their ability to spot gaps in a defence strategy – even if only at a conceptual level – is often hugely important. Fortunately, many of the most effective steps an organisation can take do not rely on a high degree of technical familiarity with IT systems.
There are steps that organisations can take to enhance their cybersecurity regime, including using Endpoint Protection, implementing remote monitoring, tracking and remediation. Updating remote access protection, installing virtual firewalls and multi-factor authorisation are all very important as well. Of course, you don’t want to stop your company doing business, so even with things like multi-factor authentication you need to think about how often it is required and whether it needs to cover every device or network.
In a hybrid or work-from-home environment this is especially important. Again, there are simple tools that can make a big difference. Office 365 Advanced Threat Protection helps to detect and block potentially malicious files from entering document libraries or team sites, or locking the file and preventing anyone from accessing it once it’s been identified as malicious. Also, these files are included in a list of quarantined items, so members of the security team can download, release, report or delete them from the system.
The other element that GCs must keep in mind is training, whether for their own team or the organisation more broadly. First, regular training is essential. If you only train once a year [the message] loses its impact and offers minimal protection. The form of the training is also important, and it pays to get creative. There are services available that do mock attacks with a fake phishing email sent around, and then if someone clicks on the link in error, they must take a remediation course and will ideally not make the same mistake again.
Of course, even the best protections and training cannot prevent a cyber incident from occurring, and having a robust response plan is essential to any cyber risk framework. A lot of companies will pull up a one-size-fits-all cyber response plan, but that’s really not good enough. A bespoke cyber response plan needs to be custom crafted for both you and your industry, and you should have a cyber response committee within the company. Everyone on this should know they’re on the team and know exactly what to do when an attack occurs. That response plan should be periodically tested in a mock attack, so it becomes part of the team’s muscle memory.
Cyber rigor, like any other part of a company’s overhead, can be seen as a non-essential cost. It is not. If you are a senior member of a public company, you’d do well to look at the SEC, the NYSE and NASDAQ who are all really pushing cybersecurity. A cyber incident is already an event requiring an 8k event form be filled out within three days, but it is increasingly becoming a potentially catastrophic reputational risk.
Ask yourself: Do you want this on the front page of the Wall Street Journal, New York Times or the Washington Post? Do you want to have to answer to your board of directors, or to the securities regulators or to the investors or to the general public? If not, then taking the risk seriously now is the best defence.