Updated: May 13, 2024
Ask ACE
Ask ACE: How can my company make a real commitment to ESG goals?
By Carrie Green Yardley, Yardley Esq. PLLC
Q: My company has expressed its commitment to environmental and social responsibility, and we need to make that commitment real. How?
ACE advises: You may be familiar with investors’ use of responsible Environmental, Social and Governance factors to make investment decisions. Attracting capital is a powerful incentive. For business owners like yourself, decision-making based on sound environmental, social and governance principles is simply the right thing to do.
Environmental and social issues give rise to compelling stories — extreme weather, asylum seekers and the housing crisis, for example. By contrast, governance dwells in the dark world of lawyers, generates reems of paper, and seems, frankly, boring.
Governance distributes rights and responsibilities throughout a business, from owners (members, shareholders), to board members, managers, employees, and stakeholders (lenders, customers, and vendors). In the ESG context governance necessarily includes management practices.
Consequently, governance documents range from bylaws and LLC agreements to budgets, financial reports, job descriptions and process checklists. You will achieve neither your environmental nor your social goals without them.
Let’s assume your LLC owns a large property and anticipates developing it for a combination of residential and commercial purposes. It is committed to development incorporating green principles.
Does your LLC agreement reflect this commitment? Has the LLC’s leadership adopted a clear environmental policy statement to be integrated into its commercial commitments, such as tenant leases and vendor contracts? Do your contract negotiators summarize how the other party has committed itself to operate within your policies before presenting the contract for signature? Have you authorized your negotiators to recommend contract awards to someone other than the lowest bidder? Does your budget reflect this?
These are not just paperwork; they will help your business prosper. In the words of BlackRock founder Larry Fink, “purposeful companies, with better environmental, social, and governance (ESG) profiles …outperform(ed) their peers.”
Carrie Green Yardley, vice president of ACE, founded Yardley Esq. PLLC in 2015. The firm works with small businesses and owners on governance and transactions, from startup to exit. She can be reached at carrie@yardleyesq.com.
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