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.