Why climate change is a legal responsibility
In May the Prince of Wales spoke by video to the Global General Counsel Summit, hosted by the Association of Corporate Counsel (ACC). ACC, a global association of in-house lawyers, may have seemed at first like a curious place for the prince’s message: namely, that climate change is a serious threat, and a serious challenge, to business.
But the ACC summit was exactly the right place for the message. After all, businesses and their actions make an extraordinary impact on the environment. ACC’s own data confirms this. According to its 2019 Chief Legal Officer Survey, which canvassed over 1,600 chief legal officers (CLOs) and general counsel (GCs) in 55 countries, it found that 93 per cent of respondents led, influenced or significantly contributed to their companies’ sustainability plans.
How General Counsel can change hearts and minds
GCs are on the front lines of climate change litigation – an increasingly important, and international, area of contention. They are also key allies to the board and chief executive (CEO) in setting their company’s ethical tone from the top.
ACC has asserted consistently that the legal department is an indispensable contributor to corporate sustainability efforts – not only the “green” issues, like reducing a company’s carbon footprint, but in governance, fair operating practices and even human rights. According to the ACC survey, though, 73 per cent of sustainability plans had an explicitly “green” focus.
The Prince’s Accounting for Sustainability Project (A4S), established in 2004 to encourage sustainability in businesses in the world of finance, has long made a rather impactful case.
In A4S’s vision, financial leadership is essential for embedding sustainability into decision-making. Financial risk is inextricably linked to climate change. It is now no longer unusual for investors to comb through financial reports for proof of an effective sustainability plan. In discussions on strategy, business model and bottom line, it is now common to hear questions on carbon emissions, sustainability practices and fossil fuel consumption. In a recent A4S survey, 81 per cent of finance professionals thought the effects of climate change would start to hit their bottom line within the coming ten years.
Who’s responsible for driving corporate sustainability?
So, should finance or legal take the lead? Is the GC the most important corporate officer for making corporations sustainable? Or is it the chief financial officer (CFO)?
If you took the prince’s cue and guessed both, you’re right. There are important roles for both key corporate officers to play.
Following a meeting at St. James’s Palace, ACC and A4S have agreed to work together on informing and empowering these key C-suite officers to develop, implement and strengthen sustainability programmes.
ACC and A4S agree that investors, stakeholders and consumers organisations need to demonstrate that environmental, social and governance (ESG) principles should be at the heart of their decision-making. Both CLOs and CFOs have key roles in managing organisations’ risk, and there is arguably none greater than climate change. The World Economic Forum’s risk reports from the last few years have clearly shown increasing existential risk to the global economy posed by environmental concerns and our failure to adapt and mitigate climate change.
Most businesses recognise this. However, there is a lot of ground to cover to meet global ambitions, such as the UN’s Sustainable Development Goals.
The leadership of the CEO and board is vital, but when it comes to sustainability, the C-suite is only as strong as its officers. If the business community is serious about climate change, a seat at the executive table for CLOs and CFOs is no longer negotiable. The good news is that corporations come equipped with the leaders they need. But faced with “the final call”, leadership must act now.