ESG Standard on Environmental Justice Can Drive Greater Progress

• Author: Sally R.K. Fisk
• Position: Vice president & assistant general counsel of sustainability and environmental law at Pfizer Inc.
• Pages: 19-19

MAY/JUNE 2021 | 19

Reprinted by permission from The Environmental Forum®, May/June 2021.

Copyright © 2021, Environmental Law Institute®, Washington, D.C. www.eli.org.

The Business of Environment

W ith renewed government

focus on environmental

justice, it may be time to

consider opportunities to advance EJ

by leveraging private governance to

complement these public eorts.

Many companies have strong envi-

ronment, health, and safety programs

that collectively promote EJ. For in-

stance, by applying science to assess

— and, if needed, avoid — potential

impacts of their own and suppliers’ op-

erations on nearby communities, and

actively engaging as good neighbors.

When combined with increases in

citizen science, and the rising focus

on equity across the

Biden administration,

the need for robust

corporate EJ programs

is even more impor-

tant. However, in the

absence of common

program frameworks,

approaches used by

companies may be disparate, and in

many cases may not be transparent to

the community or other stakeholders.

Emerging in tandem with the focus

on EJ is an increase in corporate envi-

ronmental-social-governance disclosure

and in the standards supporting such

disclosures. ere may be an opportu-

nity to leverage ESG reporting to drive

greater transparency and address equity

ills where most needed. e objective

of incorporating EJ into an ESG frame-

work would be to drive positive perfor-

mance by businesses where gaps exist

in the protection of public health and

safety aorded by environmental laws.

For companies that operate in vari-

ous jurisdictions around the world,

dierences in laws might result in pol-

lution above safe levels even when the

rm has a robust compliance program.

For example, in countries with gener-

ally strong environmental laws, certain

regulations may fail to consider the cu-

mulative eect of pollutants on a given

community when applied to permit

issuance decisions. In countries with

less-developed environmental laws, re-

leases to air and water and waste han-

dling practices may not be regulated at

all. A voluntary standard and disclosure

framework might ll these gaps while

regulators work to close them.

ere are pros and cons to this idea.

On the positive side, a standard volun-

tary framework to measure EJ impact

and engagement might drive positive

outcomes for underserved communi-

ties more quickly. And likewise, compa-

nies eecting positive changes may be

rewarded with enforcement discretion

from regulators, improved reputation

both locally and with

other stakeholders, and

increased investment.

On the other side of

the ledger, companies

evaluating adoption of

a voluntary standard

EJ framework might

be fearful of explor-

ing and disclosing potential impacts of

their operations beyond what the law

requires, as they may expose themselves

to reputational harm or liability. In ad-

dition, companies might have concerns

regarding suppliers’ impacts on EJ com-

munities when they lack direct control

and ability to reduce impacts.

How might we determine whether

there is merit to implementing a vol-

untary standard EJ framework? e

answer may help companies assess

whether the potential upside of such a

framework outweighs the downside.

First, research could help determine

whether ESG priority assessments and

metrics have a positive eect in reduc-

ing environmental impacts. Do com-

panies that routinely disclose carbon

emissions, toxic air and water releases,

and waste have reduced environmental

impact compared to their competitors?

If so, there may be a case for develop-

ing the right standard of performance

and metrics to assess and measure EJ

performance.

Second, reach an industry consensus

regarding the standard, the metrics, and

verication methods to legitimately and

accurately measure corporate EJ perfor-

mance. ese metrics may include the

impact of a company’s direct operations

and the operations of its suppliers rela-

tive to air and water toxics, particulate

matter, water extraction and discharge,

waste management, corporate engage-

ment with neighboring communities,

and perhaps even the impact of climate

change on health and well-being.

Procedurally, the standards and met-

rics could be developed in a manner

similar to other public standard-setting

processes — convening stakeholders to

develop a draft approach and enabling

a period of public comment and con-

sultation. e objective would be that

the standard could then be incorporat-

ed into existing ESG reporting frame-

works, such as SASB, GRI, CDP, or the

new World Economic Forum frame-

work, to drive positive performance

where gaps exist in the protection of

public health and safety aorded by en-

vironmental laws.

Finally, have companies disclose

against the standard in their ESG re-

ports, thus driving increased awareness

and transparency, which are precursors

to improved performance.

A voluntary EJ standard and associ-

ated metrics could serve as a comple-

ment to the actions being taken by law-

makers to improve equity in environ-

mental protection. It is a concept worth

exploring to reduce impacts in already

at-risk communities.

ESG Standard on Environmental

Justice Can Drive Greater Progress

Companies need to

assess an ESG-plus-EJ

framework’s upside

and downside

Sally R.K. Fisk i s vice president

& assistan t general counsel of sus tain-

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