Connect with us

News & Analysis

Basics of Situation Analysis and Stakeholder Engagement in ESG Reporting

Published

on

By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publication of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*

The ESG Manual defines situational analysis as a process by which an organisation’s internal and external environment is analyzed in order to evaluate its current and potential capabilities to build stakeholder value. In the ESG reporting context, a situational analysis is performed to achieve an understanding of the organisation’s strategy, an understanding of the organisation’s internal and external stakeholders and their respective needs or expectations of the organization and an assessment of the value that ESG integration brings (potentially) to the organisation. The ESG reporting team should work with the organisational strategy team to understand the key strategic priorities of the business. The team is also expected to obtain a good enough understanding of the financial ambition, key products and markets and the business and the operating model of the listed company.

As a matter of fact, ESG reports target a very wide set of stakeholders compared to financial reporting. Thus stakeholder analysis, prioritization and engagement critical in ESG reporting to ensure that the ESG reports meets the needs of these diverse sets of stakeholders. Here, the term “stakeholders” is used to refer to all entities or individuals “that can reasonably be expected to be significantly affected by the reporting organisation’s activities, products and services, or whose actions can reasonably be expected to affect the ability of the organisation to successfully implement its strategies and achieve its objectives.” According to the ESG Manual, stakeholders are not only investors and regulators, but also include “those who are invested in the organization (such as employees and shareholders), as well as those who have other relationships to the organisation (such as other workers who are not employees, suppliers, vulnerable groups, local communities, and NGOs or other civil society organisations, among others).”

The assessment of stakeholder needs is a very critical step in ESG reporting and the ESG Manual recommends that the respective organization consider several factors in assessing stakeholders. The first factor to consider is the economic influence of the respective stakeholder. This is the ability of the stakeholders to influence the ability to perform economic activities through financial capital and through operating permits and licenses. Examples of stakeholders who wield economic influence include shareholders, investors, regulators, and joint venture partners. The second critical factor in assessment of stakeholders is social influence. The ESG Manual defines this as “the ability to influence the ability to acquire a social license to operate.” The key examples of organizations stakeholders who have social influence include politicians, local NGOs and community groups.

The environmental impact of the activities of the organization is also a key determinant of the relevant stakeholder. In this regard, stakeholders are identified based on those who rely on or are interested in the same natural resources exploited by the organisation and the organisation’s environmental impacts. These could include indigenous communities, county administration and the neighbourhood of the organization’s operation. Fiduciary responsibility is also key in assessment of stakeholders and refers to legal, financial and operational responsibilities the organisation has to stakeholders such as financiers, regulators, suppliers and customers. In addition, proximity stakeholders are those persons and entities that are directly affected by the day to day running of the organisation. They include employees, customers, suppliers and local communities. There are also stakeholders who are identifiable by their dependence in that they rely on the organization and its activities for their economic and social wellbeing. These include employees and suppliers along with their dependents and local communities.

In ESG reporting process, stakeholder engagement is critical in determining materiality of ESG topics for disclosure. However, different stakeholders have different kinds and levels of needs and the ESG Manual recommends the prioritizing of stakeholders according to their level of influence and expectations from the organisation. The Manual proposes that the ESG team use a stakeholder prioritization matrix to assess the importance of an organisation’s ESG impacts to the decision-making activities of these stakeholders. Where the respective stakeholder falls within the matrix depends on their level of interest in the organization and ability to exert influence. Stakeholders are classified in four categories, namely high influence but low stakes stakeholders, high influence and high stakes stakeholders, low influence and low stakes stakeholders and low influence but high stakes stakeholders.

Low influence and low stakes stakeholders include researchers, media and suppliers who the organization need to monitor regularly. Stakeholder engagement for low influence and low stakes stakeholders include actively influencing positive perception through media channels, publicly acknowledging the organisation’s interest in their views by soliciting comments on ESG performance, inviting them to launch of the ESG report and review analysis of their position regularly. Low influence but high stakes stakeholders need to be engaged routinely and examples include customers, civil society and media. Their engagement strategy should include providing regular updates on ESG performance, regularly soliciting views on the organisation’s performance with regards to ESG issues, ensuring communication is targeted to their specific needs and expectations on the organisation and managing emerging issues immediately.

On the other hand, examples of high influence but low stakes stakeholders include retail investors, social media and lenders who need to be engage routinely. The ESG Manual enumerates the engagement strategies for high influence but low stakes stakeholders as including soliciting their focused involvement and input regularly, involving them in key decision points, actively soliciting views on the organisation’s performance with regards to ESG issues, managing emerging issues immediately and reviewing analysis of their position regularly. Lastly, high influence and high stakes stakeholders include regulators, investors and employees who require regular communication from the organization. According to the ESG Manual, engagement strategies for high influence and high stakes stakeholders including incorporating them as part of the governance structure in the organisation, communicating ESG impacts frequently to them, actively soliciting their views on the organisation’s performance with regards to ESG issues and manage emerging issues touching on them immediately.

The sample outline framework for an ESG Report provided under the ESG Manual under Annex 1 recommends that the Message from the Board Chair should contain “how stakeholder expectations are identified and the framework that exists to ensure that these are addressed.” In addition, stakeholder engagement is recommended to form a key part of the ESG report. As part of the Stakeholder engagement, the ESG Manual recommends outlining the approach to identifying and prioritizing stakeholders and the stakeholder engagement strategies for the identified and prioritised stakeholders relevant to the ESG issues of the Organization.

*This article is part of an ongoing series on ESG (Environmental, Social and Governance) in Kenya by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized as one of the leading lawyers and dispute resolution experts by the Chambers Global Guide 2022. 

References

NSE, “ESG Disclosures Guidance Manual,” November 2021, p. 13-15; Available at: https://sseinitiative.org/wp-content/uploads/2021/12/NSE-ESG-Disclosures-Guidance.pdf(accessed on 04/06/2022).

News & Analysis

Why is THE LAWYER AFRICA Listing Top Law Firms and Top Lawyers?

Published

on

By

The Litigation Hall of Fame | Kenya in 2023 (The Most Distinguished 50 Litigation Lawyers in Kenya).

We live in the age of information overload where too much information (TMI) is increasingly making it difficult to find actionable legal data about a good law firm or lawyer. At the same time, legal services are increasingly going digital and finding your next lawyer is a now a matter of a few clicks. Many existing, new and potential clients are interested to know more about the lawyer handling or likely to handle their next case or transaction as every HR Manager seeks to know how their In-house Lawyer or next hire compares to peers.

The biggest dilemma especially for commercial consumers of legal services  is where to begin the journey in finding the law firm or the lawyer to meet their immediate legal need created by their new venture,  business, transaction or dispute. In-house counsel are also called upon to justify opting for one lawyer or law firm or over the other.  Hence, the rise in the popularity of international law directories rankings as an attempt to fill the yawning gap by listing a few dozen lawyers and law firms in esoteric categories that often don’t align with the legal needs of the domestic legal market.

But ranking two dozen elite lawyers or big law firms in a big jurisdiction like Kenya there are over 20,000 lawyers is merely a drop in the ocean. The result is the same candidates are listed year after year and an In-house Legal Team looking to infuse new blood in their external counsel panel is left very little discretion. At best, International legal ranking only succeed to tilt the scales in favour of few big firms and their lawyers and to aid the choice of International Legal buyers who are constrained for time in picking their External Counsel in jurisdictions where they cannot find referrals.

The questions that beg are: What about the other top law firms and lawyers who are equally good if not better but don’t have the time to fill the technical paperwork that comes with International Legal Directories rankings? What about Domestic Legal Buyers who simply want to justify why they prefer a lawyer or law firm not listed in the International Directory? Can increasing the number of listed lawyers or law firms from less 0.1% of the profession (as captured by International Law Directories) to at least 1% of the profession or higher for those specializing in the practice area help in enhancing access to justice in Africa? Can ranking law firms by number of fee earners help in the quest for a more accurate bird’s eye view of a country’s legal landscape?

At THE LAWYER AFRICA, we have set out to list Top Law Firms and Top Lawyers in the various practice areas in a way that democratizes law rankings and listings and brings this essential value add within reach of most lawyers and every law firms doing top legal work. We don’t promise to list all the top lawyers or law firms, but we commit to make sure every lawyer or law firm we list is at the top of the game in the listed practice area. We aim to help both little known and already known law firms and lawyers doing top legal work in their area of specialization get discovered by discerning clients and possibly get more opportunities to do great work.

THE LAWYER AFRICA is looking to list up to Top 200 Law Firms in every African Jurisdiction based on their reputation and number of fee earners headcount with a goal of listing at least Africa’s Top 1,000 Law Firms which are leaders in their respective countries. We also seek to list up to Top 1,000 Lawyers in every country in Africa in at least five main practice areas, namely, Litigation, Commercial Law, Property law, In-house and Private Sector or more.

THE LAWYER AFRICA categorizes law firms in large jurisdictions as Top 5, Top 10, Top 20, Top 50 and Top 100 (and allow tying where number of counsel is equal). The Top Lawyers are listed in three categories, namely, Hall of Fame (the Distinguished Top 50 or 75 Practitioners in a Practice Area), Top 100 (the Leading Top 100 Practitioners in a Practice Area) and Up-and-Coming (the promising Top 50 or 75 Practitioners in a Practice Area).  The placing of a listings depends on a number of key factors including the number of key matters or transactions handled, years in practice and experience, size of team working under a counsel, reputation and opinion of peers (where available) as established by THE LAWYER AFRICA.

THE LAWYER AFRICA prefers to list a counsel in only one listing, as far as possible. The Team tries (as far as possible) not to contact listed law firms or lawyers before the listing is finalized in the first. However, a listed law firm or lawyer may be contacted at the pre-launch stage of a list for purposes of selling merchandise relating to the launch but such engagement will not affect the listing. In case of future listings, it is expected that interested lawyers or law firms who feel they were previously left out of the list may to provide information for consideration to determine if they qualify for the next listing but that will not guarantee any listing.

THE LAWYER AFRICA undertakes not to charge for listing any lawyer or law firm. However, upon publication of a listing, as part of recovering the sunk costs we incur in the research and publication of the listings, we shall charge a token for printing and shipping of Quality A3 Certificate for listed Law Firms and/or A4 Certificate for listed Lawyers who wish to have or display the branded souvenirs or to use our proprietary digital materials in their business  branding. We may also charge listed and unlisted law firms and lawyers an affordable fee for limited banner advertising or publishing of enhanced profiles next to the listings.

For any question or feedback on any list or listing, feel free to contact THE LAWYER AFRICA PUBLISHER at info[at]thelawyer[dot]africa.

Continue Reading

News & Analysis

The Roles of the Three Parts of the Permanent Court of Arbitration

Published

on

By

H.E. Amb. Marcin Czepelak, the Fourteenth Secretary-General of the Permanent Court of Arbitration (PCA)

Continue Reading

News & Analysis

Brief History of the Permanent Court of Arbitration (PCA)

Published

on

By

By Dr. Kariuki Muigua, PhD, C.Arb, Current Member of Permanent Court of Arbitration (PCA) Representing the Republic of Kenya.

The Permanent Court of Arbitration (PCA) is a 124 Years Old Intergovernmental Organization currently with 122 contracting states. It was established at the turn of 20th Century during the first Hague Peace Conference held between 18th May and 29th July 1899. The conference was an initiative of then Russian Czar Nicholas II to discuss peace and disarmament and specifically with the object of “seeking the most effective means of ensuring to all peoples the benefits of a real and lasting peace, and, above all, of limiting the progressive development of existing armaments.” The culmination of the conference was the adoption of a Convention on the Pacific Settlement of International Disputes, which dealt not only with arbitration but also with other methods of pacific settlement, such as good offices and mediation.

The aim of the conference was to “strengthen systems of international dispute resolution” especially international arbitration which in the last century had proven effective for the purpose with number of successful international arbitrations being concluded among Nations. The Alabama arbitration of 1871-1872 between the United Kingdom (UK) and the United States (US) under the Treaty of Washington of 1871 culminating in the arbitral tribunal’s award that the UK pay the US compensation for breach of neutrality during American Civil War which it did had demonstrated the effectiveness of arbitration in settling of international disputes and piqued interest of many practitioners in it as a mode of dispute resolution during the latter years of the nineteenth century.

The Institut de Droit International adopted a code of procedure for arbitration in 1875 to answer the need for a general law of arbitration governing for countries and parties wishing to have recourse to international arbitration. The growth of arbitration as a mode of international dispute resolution formed the background of the 1899 conference and informed its most enduring achievement, namely, the establishment of the PCA as the first global mechanism for the settlement of disputes between states. Article 16 of the 1899 Convention recognized that “in questions of a legal nature, and especially in the interpretation or application of International Conventions” arbitration is the “most effective, and at the same time the most equitable, means of settling disputes which diplomacy has failed to settle.”

In turn, the 1899 Convention provided for the creation of permanent machinery to enable the setting up of arbitral tribunals as necessary and to facilitate their work under the auspices of the institution it named as the Permanent Court of Arbitration (PCA). In particular, Article 20 of the 1899 Convention stated that “[w]ith the object of facilitating an immediate recourse to arbitration for international differences which it has not been possible to settle by diplomacy, the signatory Powers undertake to organize a Permanent Court of Arbitration, accessible at all times and operating, unless otherwise stipulated by the parties, in accordance with the rules of procedure inserted in the present Convention.” In effect, the Convention set up a permanent system of international arbitration and institutionalized the law and practice of arbitration in a definite and acceptable way.

As a result, the Permanent Court of Arbitration (PCA) was established in 1900 and began operating in 1902. The PCA as established consisted of a panel of jurists designated by each country acceding to the Convention with each country being entitled to designate up to four from among whom the members of each arbitral tribunal might be chosen. In addition, the Convention created a permanent Bureau, located in The Hague, with functions similar to those of a court registry or secretariat. The 1899 Convention also laid down a set of rules of procedure to govern the conduct of arbitrations under the PCA framework.

The second Hague Peace Conference in 1907 saw a revision of the 1899 Convention and improvement of the rules governing arbitral proceedings. Today, the PCA has developed into a modern, multi-faceted arbitral institution perfectly situated to meet the evolving dispute resolution needs of the international community. The Permanent Court of Arbitration has also diversified its service offering alongside those contemplated by the Conventions. For instance, today the International Bureau of the Permanent Court of Arbitration serves as a registry in important international arbitrations. In 1993, the Permanent Court of Arbitration adopted new “Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State” and, in 2001, “Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment”.

Reference

PCA Website: https://pca-cpa.org/en/about/introduction/history/ (accessed on 25th May 2023).

Continue Reading

Trending