The Oklahoma Bar Journal May 2024

opportunity to anticipate risks and threats, allowing the company to respond more efficiently and eco nomically than when it must rely on after-the-fact issue management. GENERAL COUNSEL IS THE BEST POSITION TO UNDERSTAND THAT WORDS MATTER The stakes have never been higher for ensuring clear and effective communication. Environmental, social and governance (ESG) disclosures, corporate responsibility messag ing and environmental reporting continue to be under a bright spotlight. In some cases, the desire of companies to jump on the ESG bandwagon put messag ing before actual programs and created risk for companies whose commitments were principally aspirational. ESG ratings, with varying models and unvalidated scoring, gave rise to a proliferation of sustainability messaging and broad commitments to green and clean practices without a solid connection to process, practices and measurable progress. In response to wide-ranging variations in disclosures and the perceived difficulty for investors to assess climate-related financial risks, the U.S. Securities and Exchange Commission (SEC) published a final rule to standardize climate-related disclosures for investors on March 6, 2024. The rule was built upon the Taskforce on Climate-Related Financial Disclosures (TCFD) framework and requires disclosure of material information related to the management of climate-related risks, with metrics including green house gas emissions. 6 Greenwashing is now a dictionary- defined term 7 and part of our

controls and verifies that external facing statements are accurate, rea sonable and consistent with their company’s actions. GENERAL COUNSEL ADDS PERSPECTIVE THAT TECHNICAL SUBJECT MATTER EXPERTS (SMES) MAY LACK Functional groups tend to view risk from tactical and siloed per spectives. While general counsel cannot, and would not desire to, replace SMEs, the nature of the general counsel’s role provides an enterprise-wide field of vision. Some legal departments treat risk management as a compliance issue, but not all risks can be managed through a rules-based paradigm. Additionally, not all risks an enter prise faces will fit neatly into a predefined compliance program. Asking the right questions can help in avoiding unintended consequences. For example, prioritizing work or replacement of assets involves technical exper tise, but justifying which assets are prioritized and documenting how those decisions were made can save a company from allegations of ignoring risk or failing to evalu ate consequences. Companies can survive mistakes but will have a more difficult time defending action or inaction absent a robust process supporting the approach taken. The reasonableness of that process can be the difference between a regret table incident and a devastating, company-ending failure. Beyond asset management and integrity management, the general counsel has a view into operational, bud getary and regulatory workforce management. This enterprise- wide perspective uniquely avails the general counsel of the

increased across the state. Maui County has argued that HECO should have de-electrified many of its electrical wires as Hurricane Dora neared Hawaii with Category 4 winds forecast to hit Maui the day of the fire. The expected cost of the Maui wildfires is estimated at around $5.52 billion to rebuild and does not include any lawsuits that may arise in the coming months and years. HECO has denied responsibility, but the full impact of this incident may not be known for years. by Navitas Midstream LLC in Midland, Texas, exploded and caused a fire that burned for over an hour, impacting another gas line directly above the Navitas line, which then caused another explosion that killed one Navitas employee and grievously injured first responders. Navitas had 300 leaks reported in the three years they had owned the line prior to the incident, giving rise to alle gations of ample notice without mitigating the risk. These and similar incidents highlight the need for companies to properly identify inherent risks, implement controls and actively monitor and manage residual risk. Enterprise risk management is ineffective if the process happens once a year and sits on a shelf. General counsel has a unique role in this process. As a member of senior management and an advi sor to the board, the general coun sel’s role entails more than merely managing legal risks. General counsel also validates their enter prise’s risk framework, governs risk processes, understands their company’s material risks and Navitas Pipeline Incident In 2018, a gas line owned

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

56 | MAY 2024

THE OKLAHOMA BAR JOURNAL