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Published 30 May 2022
Ben Daniels, Partner and board member of international law firm DAC Beachcroft, examines the results of a survey, conducted with the support of IHL readers, to identify boardroom priorities and explore how climate change is being addressed. This is the third time we have run a boardroom priorities survey and the responses are helping build a strong picture of evolving priorities as boards face unprecedented challenges. Thank you to all those who have participated to help create valuable insights.
Last year’s survey explored how COVID had changed the direction of focus and how boards were dealing with the crisis. Digital transformation had been identified as a high priority in the 2020 survey and remained in this position. Employee well-being though raced up the agenda – from a low starting point in 2020 to a very close second to digital transformation. The response to the pandemic was an imperative. Is the reaction to the climate crisis in the same category?
In last year’s survey, environmental and related concerns had increased in significance from 2020, but the change was still only slight. The 2015 Paris Agreement, the setting up of the Task Force on Climate Change, the BBC’s influential Blue Planet series and Extinction rebellion, for example, were all evidence of political, regulatory, media and public opinion pushing for change. Other emergencies however, pushed climate concerns down the corporate agenda.
This most recent survey shows that climate change has become the leading priority for the boardroom. This is a significant shift. The overwhelming majority (90%) of respondents said that their organisations had become more active in relation to climate change over the last year. 75% of respondents scored their organisation at least 5 out of 10, when asked if they were proud of what the board was doing to address climate change.
“ Being a responsible business is fundamental to the way DAC Beachcroft behaves and a cohesive and interconnected ESG strategy has become an imperative to maintaining and building on this approach. ”
Virginia Clegg, Senior Partner
In-house lawyers reported that their climate strategies are robust and long term and that climate change is an embedded part of risk registers and governance structure. That sustainability is driving investment decisions, different forms of energy are being taken up and greater consideration is being given to waste management are all further positive signs of behavioural change. Changes to production methods and design of products were much less frequent responses.
The E of ESG
Employee Well Being
The S of ESG
The G of ESG
Future physical workplace
While the areas explored in our survey are not exactly the same year on year, there is still a clear picture emerging of changing priorities. The top four priorities are part and parcel of the same issue – ESG. Indeed, the majority are part of the ESG agenda. This speaks very much of a shift in priorities towards corporate behaviours. The increased focus on shareholder and stakeholder engagement highlights the importance of dialogue, especially in a time of crisis and change. It was a practice that successful businesses augmented during COVID and it seems to be continuing. It is also perhaps indicative both of more stringent regulations, sophisticated reporting and of businesses acknowledging their societal role. If CSR was an early step in improving standards of corporate behaviour, then ESG is about looking to solve longer term systemic issues with a more systematic way of measuring and monitoring progress.
Lois Duguid, is DACB’s Head of Responsible Business; a dedicated specialist . Together with other senior leaders of the business Lois sits on our ESG Steering Committee.
Lois, “My role is as client facing, as it is internal. We are working in partnership with our clients to support this significant shift in priorities to corporate behaviours."
Responsibility: The majority of respondents, 38%, said they had no one single person responsible for climate change strategy. 4% had a dedicated Head of Environment. In other instances, the responsibility was equally allocated to either a Head of ESG or the Chief Operating Officer.
Resilience: 64% of respondents reported that they felt their organisation’s strategic decisions on climate change had long and short term resilience. 12% felt that their position was satisfactory for the short term and a further 12% said that organisational decisions were re-active rather than pro-active.
Recent updates : At one end of the scale, nearly half of respondents reported that their climate change strategy had been updated recently in 2020 or 2021. 6% reported that their organisation had no climate change strategy at all.
Support: Climate change and the wider ESG agenda is complex and interconnected and affects every area of the organisation. Addressing it effectively means moving beyond functional silos, which requires organisational change. Perhaps it is not surprising then that more businesses – 22% - said they felt their organisation needed the most support with an evolving climate change strategy. However, organisations identified that support was required, spread fairly evenly, over a number of different areas. These included: adapting business operations, finding appropriately qualified personnel, reporting, adapting the business model , addressing regulatory change and financing the changes.
2022 marks the 30th anniversary of the Earth Summit in Rio de Janeiro when global efforts to fight climate change really began with the UN Framework Convention on Climate. Significant agreements have been reached in that period and important actions taken. John Kerry, USA envoy for Climate at the WEF, earlier this year spoke for many when he said, “no-one is moving quickly enough.” However, this survey shows a significant shift in the corporate world over the last year. Strong foundations have been laid to address both the hard challenges that need to be tackled before 2030 and arrive at legal solutions that protect organisations and promote sustainability for resilience. COP 27, in Egypt in November 2022, is another milestone. It will be interesting to explore if further operational shifts have taken place in advance of this and of those that will come as a result.
Note: 75% of respondents were from businesses with more than £50m turnover and 50% employed from than 500 people. Respondents were from a wide cross section of industries.
Please note, the article was first published in In House Lawyer, Spring 2022.
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