Focus on the role of the legal department in ESG reporting

The role of the company’s general counsel has been the subject of significant changes over the last few years. In addition to the more traditional duty as the company’s legal adviser, general counsel have been increasingly involved in dealing with other issues within their organisations, such as preventive regulatory compliance, governance, and even fields that go beyond the traditional scope of legal affairs, such as sustainability and ESG data reporting. This is particularly true in the case of CAP, a publicly traded company involved in the mining sector, where we deal with these topics within the legal department.

From a regulatory or rule-setting perspective, we are subject to the oversight of the financial regulator (CMF) and the rules of the stock exchanges where we trade our securities. Our regulator recently passed a new law requiring public companies to disclose a substantial amount of ESG-related information to the market by means of integrating this data into the company’s yearly reports. This has led to our legal team working closely with the finances and investor relations divisions to provide accurate data that can be used by investors in the decision-making processes, thereby broadening the role of the general counsel, which is required to handle more technical and operational aspects.

We interact with shareholders regularly, receiving increasingly sophisticated requests for ESG-driven information from them. These issues include most of the ESG megatrends such as climate change and emissions levels, water use, employment standards, board diversity, and human rights in the supply chain. Similarly, ESG issues are raised each year in our yearly shareholders meeting. In this scenario, we must analyse an array of internal, external, and qualitative data relating to how CAP deals with these crucial topics and how we integrate these issues into our operations, business, and workplace environment.

One of the main challenges we have encountered is the lack of standardisation of the metrics and data that companies use to report their ESG data. Investors rely on the data provided by companies for their investment decisions, and the information disclosed by different organisations may vary in terms of the quality of data and underlying methodologies. This lack of standardisation leads to information asymmetries for investors, who would benefit from standardised data disclosures, much like IFRS has done for accounting and auditing. Although we are certainly on the right track in requiring companies to disclose their ESG information, companies, investors, and the market would benefit from developing standardised ESG data reporting practices.