In-house counsel play a vital role in convincing boards to act on climate change. As explored in our recent ½Û×ÓÊÓƵ report ‘Implementing the E of ESG: why in-house lawyers are instrumental’, in-house counsel have a ‘seat at the table’ and are in a position to influence change from the very top of the organisation. General Counsel are seen as ‘trusted advisers’ within the business, able to take a wider approach to decision-making and providing valuable insight that others across the organisation do not possess.
In-house counsel are also ethical champions, concerned with various moral considerations beyond the purely commercial, which protects the business by encouraging longer-term thinking, as well as more objectivity and maturity when making decisions. In-house counsel are thus in a prime position to make the argument for sustainability to the board, stressing short- and long-term financial, cultural, and ethical benefits.
In this article, I explore how in-house counsel can make that argument, gain buy-in from the board, and ultimately create a company-wide culture of sustainability.
In-house counsel should start by highlight the and the risks of inaction on climate change from a business perspective.
Organisations need to be prepared for all possible risks, the severity of which will depend on nature of the company and their industry. Here we look at four key areas of risk that in-house counsel could raise to the board to demonstrate the need for a culture of sustainability.
Physical risks
There is a between major weather events and a warming climate. From 2000 to 2015, for example, the global population at risk of flooding , according to the World Health Organisation. Such events massively impact business. Consider, for example, that drought is currently costing the EU and UK – a figure projected to rise to €65bn per year if global warming is not effectively curtailed.
Certain sectors are more susceptible to physical risk, such as businesses with connections to agriculture or leisure and tourism. But the knock-on effect of the physical manifestations of climate change ripples across the entire economy. The physical risks of the UK up to £20bn a year by 2050, according to government reports. In short, physical risks to businesses will prove extremely costly to businesses in the short medium and long-term.
Liability risks
arise from a failure to comply with regulations, which are quickly shifting to meet the demands of the moment. Climate regulations are increasing on the national and international scale – and companies need to keep up with those changes, provide necessary disclosures, and broadly ensure compliance.
Failure to do so could cost companies through fines or penalties, not to mention the cost of making changes after non-compliance. In-house counsel should show that a culture of sustainability mitigates liability risks and will likely make .
Read our practice note ‘TCFD recommendations and other ESG reporting frameworks, standards and benchmarks — 2022’ for comprehensive and up-to-date legal legal on this issue.
Labour risks
The that 80 million jobs would be at risk if rising temperatures continue. That will especially impact any business that has employees working outdoors, with heat-related illnesses becoming a particular concern.
Many companies will see more people struggling to work, more illness, and decreasing productivity. That is obviously more of a concern to particular industries, but the interconnected nature of the economy means knock-on effects will be felt by all.
Operational risks
Operational risks are a consequence of all the above. Consider, for example, that businesses may need to halt operations due to weather events or workforce displacement. Consider, too, that many businesses will see decreased productivity in the future due to worsening working conditions, and may even see a rise in illnesses because of climate change.
And supply-chain complications have a ripple effect on all organisations, creating bottlenecks due to delayed deliveries, scarcity of resources, or other issues. Consider the problems that transport delays caused across the entire economy – as seen in recent months due to myriad industrial disputes. Climate change is likely to make .
The above risks show that, while acting on climate change may bring transitional risks, inaction carries much greater risks. In-house counsel need to emphasise those risks to the board and show that a company-wide culture of sustainability will mitigate such risks.
After demonstrating the risks, legal counsel should focus on the benefits. As Kene Onyeka Allison, Vice President at Global Financial Services plc, says in the report: ‘It comes from the Board. When they have the desire to change, it impacts everyone.’ The highest level of the company needs to drive ambitious change, , and encourage pan-organisational effort on climate change.
General Counsel should make an optimistic case to the board, showing why a . Start by emphasising, among other things, that a culture of sustainability:
Remember to also focus on benefits that may help with potential problems. If, for example, the company has been struggling to retain staff, in-house counsel should highlight that the increases in staff retention and show that a culture sustainability may mitigate that problem.
In-house counsel have highlighted the risks and shown the benefits. Now they need to focus on application – showing exactly how the company can put sustainability into action in a meaningful and impactful way.
This will differ depending on the shape and size of the organisation, varying business models, and the sector. As the ½Û×ÓÊÓƵ report showed, application means embedding sustainability into ‘business as usual’ practices and into performance goals.
In-house counsel need to show what exactly that would look like for their company, with reference to actual data, projected objectives, an achievable time frame, and any other essential information. Demonstrating application means providing clarity on next steps.
Across the board, the General Counsel interviewed for our recent report gave one overwhelming message: just get started. Accept that it is impossible to know everything, and take now as your starting point.
As Nichola Westlake, Associate General Counsel - Commercial Legal Services for Centrica puts it: "The key is not to be deterred by the size and scale of it - there is a danger there. Just get going in the right direction...We can't let things derail us. We are in for an interesting time, there isn't an easy answer."
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