Young IP Practitioner’s guide to ESG

In recent years, environmental, social and governance (“ESG”) considerations have become increasingly important for Canadian companies and innovators.  From consumer demand for increased sustainability, transparency, and social accountability, to investors’ focus on ESG in investment decision-making processes; ESG criteria are now a significant marker for company success.[1] As such, robust ESG practices are imperative for companies in order to manage operational, regulatory, fiduciary, reputational, and innovative risks.

ESG-specific disclosures by Canadian public companies are also becoming the norm.[2] Just recently, the federal government announced that it will be taking further steps to increase mandatory ESG disclosures in certain public sectors.  The Government’s budget included a number of measures aimed at accomplishing a net-zero emissions economy, as well as mandatory ESG reporting requirements for federally regulated institutions.[3]

While organizations facing these issues will, more often than not, turn to corporate counsel to get advice on how to ensure legal compliance with various ESG-related requirements, IP professionals should also be prepared to assist clients in managing their ESG strategies when it comes to their IP portfolio. One way IP practitioners can help clients achieve their sustainability goals is to frame some of their analysis using the main three criteria of the ESG framework.[4]

• 1) Environmental Criteria – how is the environment safeguarded by the entity? For instance, some of the questions that may arise when discussing a new brand for a company’s product is whether there are any environmental implications of using said brand. An IP practitioner should try to determine if a brand could be construed as a claim that could have environmental implications. Would consumers be misled into thinking that such a claim is true when it is not? Does the claim constitute greenwashing? 

• 2) Social Criteria - how does the entity manage relationships with employees, suppliers, customers, and the communities where it operates? An example of this criteria could be issues surrounding the company’s management of its responsibilities towards employees or contractors and IP rights. Is there an IP transfer policy within a company? How is IP ownership managed? Is there licensing in place? If so, what are the terms of such an arrangement? 

• 3) Governance Criteria – how does the entity manage its leadership, audits and internal controls? For instance, it is requisite for companies to have appropriate data protection measures and privacy policies in place. What would be appropriate data storage, transfer and retention practices in different situations? Does the data collected or used by a company meet the requirement of being used for appropriate purposes? How transparent are the company’s practices?

These are just some examples of ESG-related issues that an IP practitioner can face when advising their clients.  There are however, many more scenarios that could be considered using the ESG framework. Consequently, an IP professional should be aware of the ESG criteria to help their clients achieve better performance, manage risk, and facilitate sustainable innovation.

[1] See Government of Canada’s publication: “Environmental, social and corporate governance: The business of doing good”, August 27, 2013, <https://cfs.nrcan.gc.ca/selective-cuttings/59>
[2] Under Canadian securities legislation, there are currently no separate specific requirements mandating environmental and social disclosures. However, corporate governance disclosure and best practices are governed by Canadian securities legislation. The Canadian Securities Administrators have published guidance to issuers on existing continuous disclosure requirements relating to a broad range of environmental issues:  <https://www.osc.ca/sites/default/files/pdfs/irps/csa_20190801_51-358_reporting-of-climate-change-related-risks.pdf>
[3] Budget 2022, “A Plan to Grow Our Economy and Make Life More Affordable”, <https://budget.gc.ca/2022/report-rapport/chap3-en.html#2022-4>
[4] See for example, “ESG (Environmental, Social and Governance) A framework for understanding and measuring how sustainably an organization is operating” by Kyle Peterdy, Updated July 7, 2022, Corporate Finance Institute <https://corporatefinanceinstitute.com/resources/knowledge/other/esg-environmental-social-governance/>

The views expressed in this article are those of the author and do not necessarily represent those of the Intellectual Property Institute of Canada (IPIC).