Webinar report: Legal Leaders: ESG – shifting landscapes and current events

‘Whether you specialise in contract law, tax law, pensions or regulation, you’ll find a home for your interest in ESG’
Jenny Block
‘Engender a moral commitment between team members and work in short, focused cycles’
Christy Baker

Environmental, social and corporate governance (ESG), was the subject of webinar number three in our 2023 Legal Leaders series.

The aim of the event was to learn how ESG affects the role of the in-house lawyer.

Anthony Inglese and Paul Bentall took up their customary webinar roles (chair and Q&A respectively) and our guest speakers were two senior lawyers from both sides of the regulatory fence.

Jenny Block is General Counsel (GC) and Board Secretary  at Ofwat, the economic regulator of the privatised water and sewerage industries. And representing regulated businesses was Christy Baker, GC and Data Protection Officer (DPO) at the multi-national transport company, FirstGroup.

The regulator’s view of ESG

Climate change presents the water industry with a very particular set of challenges. Determined to develop an effective response to these challenges, Ofwat has set three key strategic goals:

• To transform water company performance;
• To drive water companies to meet these long-term challenges through greater collaboration; and 
• To fulfil a wider public purpose, generating greater social and environmental value.

For Jenny, social and public purpose objectives illustrate a key way in which ESG is shifting the landscape for in-house lawyers. Her role involves helping stakeholders to explore and deliver improved social and environmental outcomes. 

And while Ofwat sets the framework and lays the ground rules for water companies, its overall aim is for the industry players to ‘own’ the ESG agenda.

This means encouraging them to go beyond mere compliance and look to deliver environmental and social value that is meaningful, measurable and lasting for customers and the communities they serve. 

Also central to social and public purpose is transparency. Businesses only build trust in their communities when they:

• Are open with their information and insights;
• Share their performance against their targets; and
• Publish information about their impact on the environment.

 More generally Ofwat’s approach to best value solutions has been developed through its 2025 price review and approach to large scale infrastructure projects. 

The importance of good governance, Jenny maintains, can be seen in two main ways. On the one hand, good governance improves corporate performance and minimises problems. On the other, where poor performance is affecting service levels and public trust, failures can almost always be traced back to failures in governance. 

Ofwat’s interventions, including through our board leadership, transparency and governance principles and new licence condition, as well as our pre-appointment meetings with new NEDs, have contributed to a shift within the sector. Water companies now have a more clearly defined purpose and values focused on serving their communities and the environment. Boards are rebalancing and drawing in greater expertise in the environmental and other issues that matter to customers. Transparency in reporting is generally improving. There is more still to do, however.

Asked for her advice for young lawyers who want to engage their passion for ESG, Jenny says, “It’s everywhere. Whether you’re a specialist in contract law, tax law, pensions or regulation, you’ll find a home for your interest in the environmental, social and governance agenda.”

The view from a regulated business

A leading private sector provider of public transport services, FirstGroup operates in a highly regulated industry. As such, ESG is nothing new for its GC and DPO Christy to deal with. 

What has changed, however, is where the greatest pressure to embrace ESG is now coming from. Investors and employees are more focused on issues such as net zero, diversity and inclusion (D&I) and social purpose than ever before. Today, they have a greater influence on ESG decision making at FirstGroup than regulators.

One way this is playing out is through an update to the company’s standard procurement contract. Changes to the document are being driven by D&I and sustainability issues. If FirstGroup is to meet its environmental and social targets, it needs its suppliers to meet theirs, too.

Christy also draws a parallel between his personal and professional lives. Seeing the magnitude of the challenges raised by climate change, he became deeply concerned about the world his children will inherit and his ability to influence the future. Now, with a role that ties in closely with environmental issues, the alignment between his personal and career objectives is a source of optimism.

Underlining that outlook is a clear approach to ESG goal setting. Science-based targets, an ultimate objective and interim milestones are keeping people on track far better than nebulous long term goals with no structured strategy behind them. With a net zero bus fleet target set for 2035 and an ultimate goal of being completely net zero by 2050, many of FirstGroup’s senior leadership team will have moved on by the time the target dates come around, so clear staging posts along the way are indispensable.

Similarly, building project teams with people who have interests in specific areas of ESG is important. As the FirstGroup workforce evolves, Christy is seeing more people in the legal team and across wider business functions take on roles that chime with their personal passions. In-house lawyers are excellently placed to identify these types of people across their organisations and enthuse them to get involved in cross-functional working groups.

Christy advises against allowing working groups to become eternal talking shops. While there’s space for discussion, support and mentorship within groups, the key focus should be to set targets and start work on specific tasks. Even if a target isn’t met, this positive action will get the ball rolling and keep projects moving forward.

Christy urges fellow in-house lawyers with the ESG brief to “engender a moral commitment between team members and work in short, focused cycles with objective and achievable targets.”
 
… and finally in this year’s Legal Leaders series: In-house challenges - new technology, new ethics and new boundaries is on 22 November. Register your interest here.