GCs face increased pressure on sustainability issues, Lex Mundi study finds
General counsel must balance stakeholder ESG demands with broader business needs
General counsel face a growing challenge around balancing sustainability issues with the broader financial and operational health of their businesses, according to a new report by Lex Mundi.
The study – Enterprise Values vs. Enterprise Value: Governance in an Era of Sustainable Transformation – is based on the findings from Lex Mundi’s recent General Counsel Summit in Munich.
The report highlights that amid heightened focus on environmental, social and governance (ESG) concerns, corporate governance is being less dictated by the boardroom and more by a wider variety of stakeholders who all have competing goals and interests. That is putting pressure on GCs to meet those stakeholder demands while also maintaining financial targets and regulatory compliance.
Eric Staal, vice president for global markets at Lex Mundi, said: “The preeminence of the sustainability agenda is setting in motion an overhaul of the rules of global capitalism. As part of the new economic paradigm, we have identified in the report how the model of corporate governance is giving way to a new model stakeholder governance.”
Staal added that much of the responsibility for transitioning to this new model will fall on GCs, who need to help corporate leadership teams adapt to the shifting market backdrop without impairing the broader business.
GCs noted that evolving nature of ESG concerns means that companies can’t set and forget their sustainability policies, they need to continually monitor for potential future flashpoints and other emerging risks.
There is also an increased focus on the sustainability of supply chains and ensuring they meet ESG standards, particularly to avoid risks around modern slavery. This will significantly add to GCs' responsibilities, as will helping set the tone of their company’s culture around sustainability to ensure ESG commitments are not dismissed as greenwashing.
Helena Samaha, CEO and president of Lex Mundi, said: “As the climate challenge becomes ever more pronounced, expectations are rising exponentially. Targets are rising, and new regulations are being introduced or updated across most major jurisdictions. General Counsel are always expected to be fleet of foot but increasingly need to with the guile to manage a more diverse range of stakeholders, to balance these pressures with traditional business imperatives.”