In this episode of the Better Boards Podcast Series we look at the challenges of responding to the ESG agenda, point towards the legal challenges and highlight what good looks like. Dr Sabine Dembkowski spoke with Anna-Marie Slot and Will Chalk.
Rapidly developing legal and voluntary frameworks, stakeholder demands and increasing environmental concerns all mean that ESG is fast becoming a top priority for businesses across the world. To the extent that they ever weren't, boards are now under a legal obligation to respond to certain aspects of the debate – so it's no longer a case of simply wanting to do the right thing, in certain areas it's a question of being compelled to.
The IPCC's recent report that climate change is widespread, rapid, and intensifying, are only likely to add further impetus to ESG-related policy responses.
Named Most Innovative Sustainable Lawyer at the FT Innovative Lawyers Awards, Anna-Marie Slot is Global ESG/Sustainability Partner and Global Head of High Yield at Ashurst, leading the firm's ESG strategy. She created and launched the firm's Sustainability Goals, and first digital product, "ESG Ready", as well as its first ESG-related podcast series, "30 for Net Zero 30".
Will Chalk is Ashurst's UK Head of Corporate Governance, providing strategic governance advice to FTSE-listed, AIM-quoted and larger private companies, including guiding their responses to the increasingly important ESG agenda.
Some of the key takeaways of the conversation include:
“Sustainable finance directives keep coming at pace”
Increased UK and EU regulation in terms of climate risk is challenging the balance between impact on the environment and other issues, such as the responsibility to stakeholders, workers and community. Companies are now taking a broader view of risk and how external forces can influence it. Approaching half of the FTSE250 companies now have additional committees, many of them focused on ESG and related issues.
“Don’t rush that initial stage”
Anna-Marie notes that companies are now taking a more holistic approach of where risk exists and how to address this. Investors are looking at things through “different lenses”, not simply at legal obligations.
Will believes that companies who start with their corporate purpose, and take time to create an ESG roadmap, outline objectives, and develop a framework for their business will pay dividends in the future. But do the board or senior management have the skills and knowledge to handle these issues?
Anna-Marie emphasises leading from the top, working through cross-divisional groups with engagement across the management team, as opposed to having it focused on one particular department. Different approaches that companies might use include climate champions, taskforces, and forums with a focus on younger employees. She feels it is important to set both the current and future definitions of “what good looks like”. Some companies need to establish data sources and the baseline to set targets – and acquiring and assuring this data can be difficult.
“The best in class will get out there early”
Companies want to see targets, specificity and roadmaps from governments, as opposed to new technology being touted as a ‘magic wand’. Anna-Marie says, “the best in class will get out there early”, in effect outlining how early adopters might take control of this conversation as opposed to merely being part of it.
She also says that while around half of countries have a net-zero policy, there are various interpretations of this, while Will cautions businesses to be careful about the veracity of their own statements of intention.
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