TL:DR #10 Thailand’s Continued Sustainability Initiatives and the Role of Lawyers in Environment, Sustainability Governance (“ESG”) across Supply Chains

Small Firms’ ESG Matters Too

Although there are the now normal set of polarised opinions on the causes and extent of climate change, it is perhaps not wild to suggest that when pressed most people will at least say they ‘care about the environment and society’ even if what that care translates into in practice will vary wildly. Now, anyone in a leadership or decision-making process, from the smallest to largest part of business and social activity, can make a difference to ESG practices. The media often focus on the behaviour of the largest global enterprises, because their power and ability to make a difference is accentuated by their size and reach.

However, the number of small firms and enterprises in the SME and MSME world is far higher than the larger firms, and therefore such companies and their investment and ESG decisions do have an enormous impact on societal behaviour and practice in relation to ESG. Arguably, evolving the practices of smaller firms and the smallest participants in the market may have the highest aggregate benefit.

The method through which firms and the market implement ESG practice is hotly contested between those that believe in balanced pluralistic stakeholder approaches [1] to ensure that at each level of the market there are levers to ensure better ESG behaviour even when there are flaws in universally defining the tests, and those that advocate the market should ‘decide’ by addressing ESG as it sees fit, maximum shareholder wealth should be the sole goal of the firm and shareholders can choose to distribute their residual returns and wealth into ESG as they see fit [2]

What Have Lawyers Got to Do With It?

Lawyers are generally not valued as highly by the market [7] in comparison to CEOs [8], entrepreneurs with loss-making but scalable enterprises in attractive sectors, unicorns, or even – unregulated and regulated brokers and agents [9]. Lawyers are at the bottom of the pecking order of excessive pay but are also not famous for earning too little, often sacrificing glamour for stability, and trading off risk-averse natures with the professional requirement to not become insolvent or bankrupt. Whilst more value is being attributed to ESG and this is translating into investment decisions and ‘social capital’ and ‘ESG’ ‘returns’, some value could also be attributed to lawyers who are or who are willing to be involved in advancing ESG development. So, Lawyers Lives Matter (“LLM”) too, especially when they influence ESG practices.

Lawyers, external and internal to firms, are in a position whereby they can amend contractual and investment structuring practices to require compliance not only with applicable laws relating to ESG but also codes of conduct for best practice well above the minimum. Furthermore, the quality of rights that lawyers can code into relationships [10] directly affects behavioural patterns to either pre-empt due to deterrent factors or as a correction to violations to limit damages including reputational losses. It follows that the more lawyers make an effort to understand ESG more deeply, the more such understanding will be reflected in commercial and social practice. This is supported in reports of the involvement of lawyers in supply chain practices ranging from carbon emissions neutrality initiatives; renewable use reporting; conflict material avoidance; labour rights; humane treatment of animals and responsible sourcing of materials [11].

In addition to the existing local public company and private company regulatory blanket, lawyers can wrap contracts and procedures with additional requirements, taking care to balance efficiency and costs with ESG principles and objectives and long-term negative social cost. This type of approach requires support from investors and wider stakeholders in a firm. Further, the rise of ‘Stewardship Codes’[12] designed to promote governance of institutional investors in their investment decision making and portfolios, can also be mirrored in commercial contract requirements between firms, and in audit and compliance requirements which one firm may impose on one or more firms in a supply chain.

In this regard, there is potential for lawyers themselves to be subject to codes of practice, and ESG performance measurement, monitoring whether or not lawyers are aware and implementing appropriate ESG principles in their work, subject to any legitimate corporate constraints and free of conflict of interest. Self-regulation can allow a market to flourish and grow, but eventually, the biggest players can start to dominate and the effects of their bad behaviour can be concentrated and abusive to many. ESG has become so important, and the outcomes of climate change to date even with plenty of environmental and social-based regulation still fall far short of global targets. Relying upon the market, therefore, doesn’t appear to be a realistic or sensible position to take.

Lawyers who either provide legal service in Thailand, or who are involved in a transaction or investment that is connected to Thailand, should be familiar with Thailand’s ESG evolution, and how this stands within the global order. This is a fast-paced and increasingly important aspect of business and investment, and documents, structuring, and advice should be reflective of knowledge of the key issues, economic and social costs, duties and obligations of directors, and the approach of shareholders and stakeholders over the short and long term.

[1] Dionysia Katelouzou & Alice Klettner Sustainable Finance and Stewardship: Unlocking Stewardship’s Sustainability Potential (European Corporate Governance Institute – Law Working Paper No. 521/2020, 17 April 2020, available at: )

[2] Eugene F. Fama Contract costs, stakeholder capitalism and ESG (European Financial Management Vol. 27 Issue 2. March 2021 pp.189-195

[3] Manpong Senanarong ESG & Responsible Investing in Thailand (Stock Exchange of Thailand, ASEAN Institutional Investors Forum, 14 June 2019, see: ) pp.3 “1. Sustainability Journey of the Thai Capital Market”

[4] ibid 3.

[5] Stock Exchange of Thailand see:

[6] ibid 3. See pp.5

[7] Corporate Counsel GC Compensation Chart: Who Made the 2021 Top-Paid GC List? (12 August 2021 see: )

[8] Anders Melin Elon Musk’s Outrageous Moonshot Award Catches on Across America (Bloomberg Online 4 August 2021 see: )

[9] Andrew Batt The Four Kinds of Agent in Thailand (Thailand-Property, 7 August 2015 see: )

[10] Katharina Pistor The Code of Capital: How the Law Creates Wealth and Inequality (Princeton 2019)

[11] Patrick Temple-West How lawyers are cleaning up supply chains (Financial Times Online 17 June 2021 see: ) last accessed 19 September 2021

[12] ibid 1.

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