This whitepaper by legal firm Stephenson Harwood and sustainability consultancy PIE Strategy highlights the significant issue of ESG and sustainability definition uncertainty.
According to a recent whitepaper jointly published by law firm Stephenson Harwood and sustainability consultancy PIE Strategy, confusion about the definitions of environmental, social, and corporate governance (ESG) and sustainability presents a substantial barrier for decision-making.
The whitepaper examines the role of the legal sector in assisting in these efforts while also addressing the needs of businesses and investors in reaching their sustainability goals.
PIE, the independent researcher, spoke with 26 decision-makers in-depth. To understand their needs and the opportunities and problems companies face in relation to ESG, they included corporate leaders, in-house general counsel, impact investors, and asset managers.
The respondents all concurred that a low-carbon transition was necessary but differed on how to go about achieving it, how quickly, how much money to invest, and how to do it financially. Confusion about the meanings of ESG and sustainability was greatly exacerbated by widespread misconceptions, which had an impact on investment choices and slowed the speed of change.
ESG incorporation
The gap between conventional investors and those who had a definite interest in incorporating impact factors into their investments was more obvious. While sustainability may be seen as an explicit mandate, asset managers weren’t sure whether they should include ESG in their portfolios due to its implicit nature.
“Definitions clarification could be a critical first step in resolving misunderstandings. According to Evangeline Quek, managing partner for Greater China at Stephenson Harwood, “This is where the legal profession might help clients comprehend the various meanings of terms of rules and documents, to better measure their risk exposure and ensure their commitment to making this shift.
Investors are discouraged from making investment decisions because it is more challenging for them to appropriately assess risk exposure and growth potential when listed businesses’ ESG disclosures are insufficient and of uneven quality. Government laws did not help in this area, particularly in Hong Kong. neither provided disincentive mechanisms for non-compliance nor a clear and comprehensive blueprint for the climate transition.
The interviewees also concurred that legal counsel may have a bigger impact. They can assist businesses in preparing for future requirements as well as the ones that are now in place. so navigating the repercussions that follow.
There is more to greenwashing
Targets for reducing emissions are now viewed as well-intentioned but unreliable goodwill actions. The legal profession has a unique opportunity to assist businesses in creating agreements that are fair and binding so that goodwill efforts can be turned into actions that are observable and answerable.
“This White Paper offers an Asian viewpoint to support the global discussion on ESG and climate change. To determine the viability of enacting change, extensive interviews with decision-makers and industry experts were performed. The fact that businesses and decision-makers are aware of the “why” is essential; with this Paper, we aim to assist them in figuring out the “how,” according to Natalie Chan, principal sustainability consultant at PIE Strategy.
Due to the rapidly changing fuel options and the wide-ranging effects of the shipping industry’s impact on logistics and supply chains, PIE employed the network of Stephenson Harwood and concentrated on the shipping sector as a case study. The article highlighted the significance of common and differentiated responsibility within the industrial ecosystem to support change by delving into an ecosystem viewpoint to understand the dynamics and investigate opportunities to drive system transformation.
