Written by Luke Musto, Practice Lead – Australia
Introduction
As companies set priorities for the year ahead, many are considering how Environmental, Social and Governance (ESG) concerns fits into their growth plans. For organisations expanding or already operating offshore, ESG is no longer a standalone compliance exercise or a reporting issue delegated to the end of the process. Instead, addressing ESG related concerns has to be integrated into companies’ full business strategies so as to mitigate operational, legal and commercial risks.
We are seeing this most clearly in cross-border businesses and companies working on their expansion. When operations, workforces, suppliers, or contractors sit outside a company’s home jurisdiction, ESG risk becomes more complex, harder to monitor, and more exposed to scrutiny. The companies that are planning ahead are far better placed than those reacting after issues arise.
ESG in 2026: From Reporting to Operational Risk
Over the past few years, ESG discussions have largely focused on policies, disclosures, and reporting frameworks. While those remain important, the focus in 2026 is shifting toward how ESG plays out in practice.
For companies operating across borders, ESG risk increasingly arises in areas such as supply chains, labour practices, governance of offshore entities, and the conduct of local partners or agents. Importantly, these risks do not disappear simply because activities are outsourced or carried out by a foreign subsidiary.
What we are seeing is a clear expectation that companies understand and manage ESG risk across their entire operational footprint, not just at head office.
Case study – Australian company in Chile
A company expands into Chile and engages local suppliers for logistics, construction, and site services. A series of incidents later occurs involving the supplier’s workforce. Firstly, there is a serious workplace accident that attracts media attention, and the supplier is also responsible for environmental harm in a Chilean national park adjacent to the site. Although the issue arises at the supplier level and in theory the responsibility does not extend beyond Chile, scrutiny quickly extends to the parent company in Australia, raising questions about due diligence, supplier oversight, and ESG governance across the broader group.
Key ESG Trends Shaping Cross-Border Expansion and Operations
Several themes are emerging as companies plan for ESG risk-management in 2026.
- There is increasing scrutiny of overseas labour practices, including how workers are engaged, paid, and managed by subsidiaries, contractors, and suppliers. Supply chain transparency is also becoming more important, with partners and customers expecting greater visibility over where goods and services come from and how they are produced.
- ESG considerations are increasingly being embedded into contracts, including supplier agreements, joint ventures, and distribution arrangements. We are seeing greater use of ESG-related representations, audit rights, termination triggers, and reporting obligations as part of cross-border deals.
- Governance is another key focus. Boards and senior management are expected to have oversight of ESG risk in foreign operations, even where day-to-day management is delegated locally. We are also seeing ESG expectations being built into commercial arrangements, due diligence processes, and contractual negotiations, rather than addressed after entry into a new market.
- Environmental ESG risk is increasingly tied to where operations and supply chains are located, not just how they are managed. Companies expanding into or sourcing from regions with heightened environmental sensitivity, such as areas connected to the Brazilian rainforest or Chilean Patagonia, are facing greater scrutiny from partners, financiers, and the public. Environmental incidents or perceived impacts on biodiversity, water resources, or protected land can quickly escalate into reputational and commercial issues, even where activities are carried out by third parties.
Taken together, these trends point to a more integrated and proactive approach to ESG in cross-border operations.
Where Companies Commonly Get Caught Out
In practice, ESG issues often arise not because companies deliberately ignore ESG altogether, but because assumptions are made at an early stage, and often during expansion.
Common examples include assuming local partners or agents will manage ESG compliance without clear oversight, treating offshore subsidiaries as operationally separate from group risk, or relying on standard contracts that do not address ESG expectations. Labour and cultural differences are also frequently underestimated, particularly in new markets where employment practices and regulatory enforcement differ from home jurisdictions.
Another common issue is having ESG policies that exist on paper but are not embedded into day-to-day operations. When issues arise, these gaps become quickly visible.
Planning Ahead: Practical ESG Steps for 2026
For companies planning offshore expansion in 2026, ESG should be built into the planning phase rather than addressed once operations are underway.
Practical steps include mapping ESG risks before entering new markets, reviewing contracts, suppliers, and agents through an ESG lens, and ensuring labour practices align with both local requirements and group standards. It is also important that boards and senior management have visibility over ESG risk in offshore operations, supported by clear reporting and governance frameworks.
Most importantly, ESG considerations should be factored into expansion timelines and decision-making processes from the outset.
Final Thoughts
ESG is often framed as a constraint on growth, but in practice it is increasingly a source of commercial resilience. Companies that plan ahead, understand their cross-border ESG risks, and embed clear governance structures are better positioned to expand with confidence and maintain trust across markets. Importantly, proactive ESG planning helps protect a company’s reputation at home, particularly where issues arise through overseas suppliers, contractors, or partners operating under different regulatory and cultural conditions.
As 2026 gets underway, ESG should form part of the conversation from day one for any company looking to operate beyond its home market. Addressed early and practically, ESG becomes less about compliance and more about enabling sustainable, credible, and well-governed growth.
Harris Gomez Group METS Lawyers ® opened its doors in 1997 as an Australian legal and commercial firm. In 2001, we expanded our practice to the international market with the establishment of our office in Santiago, Chile. This international expansion meant that as an English speaking law firm we could provide an essential bridge for Australian companies with interests and activities in Latin America, and to provide legal advice in Chile, Peru and the rest of Latin America. In opening this office, HGG became the first Australian law firm with an office in Latin America.
As Legal and Commercial Advisors, we partner with innovative businesses in resources, technology and sustainability by providing strategy, legal and corporate services. Our goal is to see innovative businesses establish and thrive in Latin America and Australia. We are proud members of Austmine and the Australia Latin American Business Council.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. It does not create a solicitor-client relationship, and readers should seek independent legal advice for their specific circumstances. Harris Gomez Group accepts no liability for reliance on this content.