CSR, ESG & social purpose: What in-house counsel should know

The role of business in society has changed dramatically over the past several decades. Companies are no longer only expected to be profitable and create returns for shareholders. Society is now putting pressure on companies to consider how their actions affect the greater world. This is an immense opportunity for companies to have a positive impact in the communities where they operate and on society as a whole.
Muuvment Team

There are three criteria that encompass this change in attitude. They are corporate social responsibility (CSR), environmental, social, and corporate governance (ESG), and social purpose. As companies navigate these criteria, it’s quickly becoming the role of in-house counsel to review and assess how companies comply with these guidelines to avoid accusations of “greenwashing.” Below we provide some helpful tips for in-house counsel to follow when supervising social purpose campaigns. 

First off, what’s the difference between CSR, ESG and social purpose?

Corporate Social Responsibility (CSR)

CSR is a broad concept whereby companies seek to create a strategy that considers the social and environmental impact of their actions on society and holds companies at least morally (if not legally) responsible for those actions. CSR has expanded to include a wide range of issues, such as human rights, diversity, sustainability, product safety, and corporate governance. CSR helps companies to be more socially accountable to a wide range of stakeholders. 

Environmental, Social and Corporate Governance (ESG)

ESG is derived from CSR. More recently, the focus on CSR has sharpened into ESG considerations. ESG specifically refers to the three non-financial categories of factors on which an investor can evaluate a company for potential investment and identify material risks and growth opportunities.

Social Purpose

A social purpose business is a company whose enduring reason for being is to create a better world. It’s an engine for good, creating societal benefits by the very act of conducting business. Its growth is a positive force in society. As the company prospers, its stakeholders and the communities in which it operates prosper too.  

The company’s social purpose guides its strategy, direction and culture. It goes beyond the company’s products or services. Social purpose forms the basis of what is central to the core of the company and its operations. The company’s brand proposition, strategic vision, and decision-making are all influenced by social purpose. The social purpose ultimately guides the company’s future growth pathway and objectives. 

What should in-house counsel pay attention to when reviewing a company’s social purpose campaigns?

At the outset of a social purpose campaign, more attention is often paid to business and brand considerations, while legal considerations are overlooked. But the legal aspects are too important to ignore. Here are a few considerations to take into account when putting a social purpose campaign together. 

  • Don’t overstate sustainability credentials in respect of product or service offerings. 
  • Be mindful of the actual or implied environmental and sustainability claims being made for a product or service and the legal implications of making such claims.
  • Consideration should be taken of agreements that are relevant to the social purpose campaign as these agreements may have actual and implied terms that have increasing sustainability and environmental standards.
  • These agreements include supply chain contracts, industry accreditation and sector-specific regulatory obligations.

What are the potential legal liabilities of failing to meet social purpose objectives? 

The legal ramifications for failing to meet social purpose objectives are becoming increasingly strenuous. Below are some examples.

  • Misleading advertising based on a failed social purpose campaign can lead to falling afoul of advertising standards which differ depending on where the company operates.
  • A failed social purpose campaign may lead to a company breaching environmental obligations, general consumer protection laws, or sector-specific regulations which can lead to reputational damage, fines, reduction in sales or breach of contract.
  • Breach of expressed or implied contract terms can lead to loss of revenue, decreased market share or business failure.

What can in-house counsel do to reduce risks? 

In-house counsel can play an important role in reducing the risk of “greenwashing.” Below are some practical steps to take to reduce exposure and risk when running a social purpose campaign.  

  • Counsel should complete ongoing contract review to make sure that the company carrying out a social purpose campaign does not fall afoul of expressed or implied terms in contracts agreed with clients and suppliers.
  • Counsel should determine the sustainability or environmental claims that are being made for the goods and services offered by the company, including the advertising, marketing, product labelling, and the binding regulatory obligations in the sector the company operates within.
  • Counsel should have continued visibility on whether or not the goods and services provided by the company meet sustainability or environmental claims.
  • Counsel should maintain an understanding of the claims and commitments made on behalf of the company, for example by sales teams, in commissioned advertising and in business-to-business dealings.
  • Counsel should complete regular risk mitigation assessments and determine what the company can do to responsibly promote its sustainability and environmental credentials.

How we address these issues at Muuvment

At Muuvment we take creating social purpose campaigns for clients very seriously. A lawyer on our team reviews each campaign we create. Below are the steps we take to ensure that each campaign is successful. 

  • Our team is focused on measurable impact so that all claims made can be backed by data.
  • We avoid “greenwashing” at all costs.
  • We advise companies to take a long-term approach to their social purpose goals.
  • We help companies develop campaigns that resonate with their employees and the public.
  • We help companies set realistic and concrete goals, and use our software to implement and track against those goals. 

One of our in-house lawyers or a member of our campaigns team are available to consult with you at no cost to discuss your social purpose plan. Don’t hesitate to get in touch at info@muuvment.com.