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ESG, CSDDD, and the Expanding Role of In-House Counsel: More Than Just Legal Gatekeepers

Issue 11.8
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Environmental, Social, and Governance are no longer mere buzzwords. ESG has become integral to corporate strategy and operations. Companies are now under increasing pressure from regulators, investors, and the public to adhere to ESG standards. The role of in-house counsel in ESG and the implementation of the Corporate Sustainability Due Diligence Directive (CSDDD) requires a balance of legal expertise, strategic thinking, and proactive risk management.

As ESG and CSDDD continue to grow in importance, in-house counsel will play an increasingly critical role in ensuring that companies comply with these regulations. By staying informed, collaborating across functions, and engaging with stakeholders, in-house counsel can help companies navigate the complexities of ESG and CSDDD, emerging as leaders in this rapidly evolving field.

What are the key responsibilities of in-house counsel under ESG and CSDDD?

Advise on Implementation

In-house counsel must be deeply involved in both the company’s ESG strategy and the specific implementation of CSDDD requirements. This involves advising on the legal and business risks associated with ESG and CSDDD, ensuring the company’s goals align with the directive’s requirements, and helping integrate these considerations into business operations. In-house counsel must work closely with the departments involved in implementation, such as compliance, human resources, and sustainability to ensure that both ESG and CSDDD initiatives are legally sound and effectively implemented.

Navigate the Regulatory Landscape

The regulatory environment surrounding ESG, particularly with the introduction of CSDDD, is rapidly evolving. In-house counsel must stay abreast of these developments, ensuring that the company is compliant with all relevant regulations. This includes understanding the specific requirements of CSDDD, such as the need for comprehensive due diligence across the entire value chain, and advising on potential legal risks associated with non-compliance, including litigation and reputational damage.

Review the Contracts

Collaborate closely with various functions to incorporate precise ESG and CSDDD-related clauses into contracts, ensuring that the company not only meets but exceeds regulatory requirements. It is the in-house counsel who can reinforce the company’s commitment to sustainability and human rights, drive accountability across the supply chain, and mitigate potential legal risks associated with non-compliance.

Ensure Accurate Reporting

Transparency is crucial for ESG. In-house counsel plays a critical role in ensuring that the company’s ESG reporting and disclosures, including those required by CSDDD, are accurate, transparent, and compliant with regulatory requirements. This involves reviewing ESG reports and CSDDD-related disclosures, ensuring all statements are substantiated by evidence. In-house counsel must be aware of the risks of greenwashing (where companies make misleading claims about their ESG performance) and take steps to mitigate these risks by ensuring all ESG and CSDDD communications are honest and accurate.

Managing ESG and CSDDD-Related Risks and Litigation

As ESG and CSDDD issues gain prominence, the risk of related litigation increases. This includes lawsuits related to environmental damage, human rights violations, and corporate governance failures. In-house counsel must proactively identify potential ESG and CSDDD risks and develop strategies to mitigate them. This may involve conducting regular audits, implementing robust compliance programs, and advising on best practices for managing these risks. This also goes hand in hand with contractual safeguards and their effectiveness.

In-house counsel are currently navigating a steep learning curve to manage the expanding scope of ESG-related responsibilities. So, what practical tips can help them effectively handle these new challenges?

1. Invest in understanding the principles of ESG and the specific requirements of CSDDD. This may involve attending ESG and CSDDD-focused training programs, participating in industry forums, and staying updated with the latest developments in ESG and CSDDD law.

2. Make sure you hire a consultant you can rely on. ESG and CSDDD involve a complex set of rules. Do not miss the full picture and onboard an expert who would be able to help you navigate and find the right track.

3. Collaborate across functions. ESG and CSDDD are multidisciplinary issues requiring collaboration across different functions. In-house counsel should work closely with other departments to ensure a coordinated approach and leverage the expertise.

4. Engage with stakeholders, including investors, regulators, and customers. This is essential for ensuring that the company’s ESG and CSDDD strategies meet their needs. In-house counsel might be also a good fit to facilitate stakeholder engagement and ensure the company’s initiatives align with stakeholder expectations.

5. Monitor and adapt. Regularly review the company’s ESG and CSDDD strategies and make necessary adjustments to ensure continued compliance and alignment with business objectives.

Summing up, ESG is about corporate strategy, risk management, and reputation. Companies are expected to go beyond compliance to proactively manage their environmental and social impacts while ensuring strong governance practices. This shift has placed in-house counsel at the forefront of ESG strategies, requiring not only legal expertise but also a deep understanding of the broader business implications of ESG.  

By Pawel Borowski, Head of General Legal, Zentiva

Czech Republic Knowledge Partner

PRK Partners, one of the leading Central European law firms, has been helping clients achieve their business objectives almost 30 years. Our team of lawyers, based in our Prague, Ostrava, and Bratislava offices, has a unique knowledge of Czech and Slovak law and of the business environment. Our lawyers studied at top law schools in the United States, United Kingdom, Switzerland and elsewhere. They also have experience working for leading international and domestic law firms in a number of jurisdictions. We speak your language, too. Our legal team is fluent in more than 15 languages, including all the key languages of the region.

PRK Partners has one of the most experienced legal teams on the market. We are consistently rated as one of the leading law firms in the region. We have received many significant honours and awards for our work. We represent the interests of international clients operating in the Czech Republic in an efficient way, combining local knowledge with an understanding of their global requirements in a business-friendly approach. We are one of the largest law firms in the Czech Republic and Slovakia. Our specialised teams of lawyers and tax advisors advise major global corporations as well as local companies. We provide comprehensive legal advice drawing on our profound knowledge of local law and markets.

Our legal advice delivers tangible results – as proven by our strong track record. We are the only Czech member firm of Lex Mundi, the world's leading network of independent law firms. As one of the leading law firms in the region, we have received many national and international awards, in some cases several years in a row. Honours include the Chambers Europe Award for Excellence, The Lawyer and Czech and Slovak Law Firm of the Year. Thanks to our close cooperation with leading international law firms and strong local players, we can serve clients in multiple jurisdictions around the globe. Our strong network means that we can meet your needs, wherever you do business.

PRK Partners has been repeatedly voted among the most socially responsible firms in the category of small and mid-sized firms and was awarded the bronze certificate at the annual TOP Responsible Firm of the Year Awards.

Our work is not only “business”: we have participated on a longstanding basis in a wide variety of pro bono projects and supported our partners from the non-profit sector (Kaplicky Centre Endowment Fund, Tereza Maxová Foundation, Czech Donors Forum, etc.).

Firm's website: www.prkpartners.com

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