Alexander Mäschle: “Circular economy claims and human rights allegations across supply chains are next ESG battleground"

Leaders League: How are ESG considerations influencing corporate governance and board-level decision-making in multinational companies?

Alexander Mäschle: Their influence is growing steadily and fundamentally. ESG has evolved from a voluntary commitment into a core fiduciary responsibility for executives and board members. The conversation has moved well beyond sustainability reporting. Today, ESG-related risks are fully embedded within enterprise risk management frameworks and must be addressed through coordinated strategies and effective implementation.

What I see is both a structural and cultural transformation of corporate governance. ESG is increasingly shaping executive compensation schemes, gender pay equity initiatives and strategic decision-making processes. Dedicated sustainability committees are becoming standard practice, while companies are investing heavily in data-driven reporting and monitoring systems.

At the same time, executive decisions are now expected to account for ESG-related risks ranging from supply chain disruptions and climate transition costs to broader reputational and financial exposure. Failure to adequately manage these risks can threaten long-term corporate resilience and, in some cases, create personal liability for directors and senior executives.

What legal risks do companies face when their sustainability disclosures fail to meet evolving regulatory expectations?

The risks operate on several levels. First, there is the regulatory dimension. Authorities are increasingly empowered to impose significant penalties for misleading, incomplete or inaccurate disclosures under frameworks such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and, in the United States, climate disclosure requirements driven by financial materiality considerations.

Second, companies face growing litigation risks from investors and shareholders. We are seeing more derivative actions and securities-related claims alleging breaches of fiduciary duties or misrepresentations concerning ESG performance.

Third, non-compliance can have direct commercial consequences. Companies may find themselves in breach of sustainability-linked financing agreements, exposed to less favorable lending conditions, or excluded from tenders and supply chains where customers demand robust and verifiable ESG data for their own reporting obligations.

How are recent green law initiatives in Europe and other major jurisdictions reshaping corporate compliance strategies?

Legislation such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) is fundamentally changing the compliance landscape. Compliance is no longer a reactive, monitoring-focused exercise; it is becoming a proactive, value-chain-wide operational function.

The focus is shifting beyond a company’s immediate legal perimeter to encompass its broader ecosystem of suppliers, partners and stakeholders. Organizations are moving away from simply drafting internal policies and are instead implementing continuous monitoring systems, supplier due diligence programs and contractual ESG requirements throughout their supply chains.

Even amid discussions around regulatory simplification (such as EU Omnibus proposal) and cost pressures, compliance officers are increasingly expected to take an operational role. Effective data governance has become a strategic priority, particularly for multinational organizations managing complex structures and fragmented IT environments.

What role should business lawyers play in helping companies avoid greenwashing allegations while maintaining ambitious sustainability goals?

The role of in-house counsel is not to slow down sustainability ambitions, but to ensure that every public claim is supported by credible and verifiable evidence. Their mission is to bridge the gap between marketing aspirations and legal reality.

Best practice requires robust legal review procedures for environmental claims and sustainability-related communications. Lawyers should help ensure that statements are precise, appropriately qualified and based on transparent assumptions, reducing the risk of regulatory challenges and reputational damage.

How can legal departments contribute to embedding sustainability principles into long-term corporate strategy?

Cross-functional collaboration is essential. When legal and compliance teams are positioned as strategic enablers rather than control functions, they can play a critical role in integrating sustainability into long-term business planning.

This requires early involvement across the entire value chain. ESG criteria should be incorporated into areas such as M&A transactions and contractual frameworks, with sustainability KPIs linked to commercial milestones and performance expectations.

Legal teams also create value by translating increasingly complex ‒ and sometimes conflicting ‒ regulatory requirements into clear operational policies and strategic guidance. In doing so, they strengthen organizational resilience and help businesses navigate a rapidly evolving regulatory environment.

Looking ahead, do you expect ESG litigation and regulatory enforcement to increase in connection with environmental performance claims?

Absolutely. Across Europe, we have already seen how enforcement approaches developed in areas such as competition and antitrust law are now being applied to sustainability-related matters. Regulators increasingly view themselves as guardians of broader Green Deal objectives, particularly where industry practices or innovation strategies are perceived to have negative environmental impacts.

We have effectively entered an era of sustainability enforcement. As reporting frameworks become fully operational, regulators will gain access to standardized and comparable datasets, making it far easier to identify inconsistencies and initiate investigations.

At the same time, litigation is likely to accelerate due to growing pressure from NGOs, consumer advocacy groups and shareholders using climate liability theories and consumer protection laws to challenge corporate behavior.

Most importantly, the scope of scrutiny is expanding. While carbon emissions will remain a central focus, the next wave of disputes is likely to center on circular economy claims, resource efficiency promises and allegations of human rights violations within global supply chains. These areas are rapidly emerging as the new frontiers of ESG litigation and enforcement.

Sophie Stevenard