Paulo Santos (ERM): “Environmental issues are becoming increasingly connected to strategic business concerns”

Leaders League: How are ESG considerations influencing corporate governance and board-level decision-making in multinational companies?
Paulo Santos: In recent years, ESG has evolved from a peripheral agenda to one that occupies an increasingly central role in business decision-making. What we observe today is a significant shift in how boards of directors exercise their responsibilities. Sustainability-related issues are no longer treated as operational or reporting matters; they have become integrated into discussions on strategy, capital allocation, risk management, growth and business resilience.

Boards are increasingly expected to oversee risks and opportunities associated with topics such as climate change, energy transition, resource security, supply chains, regulatory developments and investor expectations. In many organizations, these discussions are already embedded in the processes that guide long-term corporate decisions.

For multinational companies, particularly in sectors such as energy, mining, agribusiness, infrastructure and manufacturing, sustainability-related issues are already influencing investment decisions, operational expansion, supply chains and stakeholder engagement.

In Latin America and the Caribbean, this transformation is particularly relevant. The region holds some of the world’s most strategic assets for the global transition, including critical minerals, renewable energy potential, natural resources, and a leading position in food production. As a result, ESG topics are becoming increasingly connected to discussions around economic growth, competitiveness and companies’ global positioning.

What we see today is a more pragmatic approach. Boards are less focused on declaratory commitments and more attentive to organizations’ ability to transform sustainability into a competitive advantage, strengthen resilience and create long-term value.

Ultimately, sustainability is no longer treated as a parallel agenda; it has become part of the core discussions that define the future of business.

What legal risks do companies face when their sustainability disclosures fail to keep pace with evolving regulatory expectations?
The risk goes far beyond regulatory compliance. Today, companies’ sustainability performance, as well as how that performance is reported to the market, influences investment decisions, access to capital, financing conditions, commercial relationships and stakeholder trust.

When such information is incomplete, inconsistent or unsupported by robust governance processes, organizations may face not only regulatory scrutiny but also reputational damage and increased oversight from investors, customers and financial institutions.

What makes this environment particularly challenging is that expectations continue to evolve across jurisdictions. While some regions seek to simplify certain reporting requirements, others continue to expand transparency obligations and adopt new sustainability-related standards.

At the same time, investors and other users of this information continue to demand increasingly higher levels of quality, consistency and comparability.

As a result, the greatest risk for many organizations is not necessarily failing to comply with a specific regulation. Rather, it is failing to develop internal governance structures, data management capabilities and accountability mechanisms that can keep pace with an environment where transparency expectations continue to rise. Therefore, this discussion goes beyond compliance ‒ it is about building trust.

The organizations best positioned to navigate this landscape will be those that treat sustainability-related information with the same level of rigor, governance and reliability historically applied to financial information.

How can legal and finance departments contribute to embedding sustainability principles into long-term corporate strategies?
Legal and finance functions are becoming increasingly important in transforming sustainability into execution. The finance function plays a critical role in capital allocation, investment evaluation and the definition of strategic priorities. As sustainability-related issues increasingly influence operational resilience, efficiency, risk management, and access to financing, integrating them into financial processes is no longer a choice ‒ it is a business necessity.

Legal departments, in turn, play an essential role in establishing governance structures capable of keeping pace with an increasingly complex regulatory environment, strengthening control mechanisms, and ensuring that public commitments are supported by consistent processes and robust evidence.

The organizations making the greatest progress in this area are those that have stopped treating sustainability as an isolated initiative. Instead, they have embedded sustainability considerations into the processes that guide investment decisions, risk management, operational performance and long-term planning.

The real differentiator lies in the ability to integrate sustainability into the decisions that shape the future of the organization. Companies that achieve this integration consistently transform sustainability from a corporate agenda into a competitive advantage.

Looking ahead, do you believe there will be an increase in litigation and regulatory enforcement related to environmental performance claims?
The increase in regulatory scrutiny and accountability regarding companies’ environmental performance is already a reality in several markets. This trend is being driven by multiple factors that have converged in recent years.

Transparency requirements continue to evolve across jurisdictions, investors are demanding increasingly robust and comparable information, and society expects concrete evidence of the progress reported by organizations.

At the same time, environmental issues are becoming increasingly connected to strategic business concerns, including energy security, climate change, supply chain resilience, biodiversity and economic competitiveness.

As these issues become more relevant to corporate performance, expectations regarding the quality, consistency and credibility of information shared with the market also increase.

The form and intensity of this trend will certainly vary across countries and industries. However, the direction is clear: regulators, investors, customers, and society will continue to demand higher levels of transparency, evidence and accountability.

At ERM, we observe that the organizations best prepared for this environment are those that treat information quality, management capabilities, and sound decision-making processes as strategic business assets.

This approach enables organizations to respond more quickly to regulatory changes, strengthen stakeholder trust, and reduce exposure to risks over time.

In this context, the priority should not be merely to keep pace with new requirements. It should be to build organizations capable of demonstrating, clearly and consistently, that their commitments are supported by concrete and measurable results.