With the implementation of the EU’s Action Plan on Sustainable Finance and the ensuing regulation, an increasing number of companies are querying whether they may need to revise their internal governance in the future and perhaps appoint a Head of ESG. Luther challenges this by turning the question around: can companies afford NOT to have a dedicated Head of ESG any longer?
In addition to keeping up with a legal environment that is evolving more rapidly than ever before, companies may be confronted with challenges posed by increased external stakeholder “sustainability” surveillance (whether it be from business partners, clients or future employees); however, this changing situation should not solely be regarded as an additional burden but should rather be embraced as an opportunity. It might also be a potential turning point at which appointing a Head of ESG might become the norm – not only to track the legislative evolution, but also to ensure that sustainability integrates the DNA of the company at all levels.
Companies may be confronted with challenges posed by increased external stakeholder ‘sustainability’ surveillance.
What would the Head of ESG role comprise? The Head of ESG would add value to a company’s organisation by ensuring that potential ESG-related risks are accurately reflected throughout the organisation and, thus, would be in charge of implementing an appropriate internal corporate governance structure; ascertaining that internal and external stakeholder interests are pertinently reflected as well; and shaping and assisting the relevant governance bodies, taskforces and committees.
The time is now
Why act now? Companies that are not ESG-compliant may not only be at risk of being shunned by customers and future employees, who increasingly advocate for sustainability, but may also literally pay a hefty price when it comes to accessing the capital markets where companies that have an integrated ESG strategy are favoured. Companies should thus act now not to lose too much ground. The winners of this race will clearly be those who anticipate internal and external demands and stay on par with upcoming regulation, making the need for a Head of ESG even more imminent.
The winners of this race will clearly be those who anticipate internal and external demands and stay on par with upcoming regulation, making the need for a Head of ESG even more imminent.
“Companies may likely suffer from the lack of compliance and fall back behind their compliant competitors but could also be severely penalised by stakeholders shunning their business. This will certainly make companies think twice as to whether they can do without a head of ESG in the near future,” says Bob Scharfe, Partner in Banking, Finance & Capital Markets at Luther. “Through our multidisciplinary teams and our extensive network, we at Luther are ideally positioned to advise our clients on the regulatory spectrum of corporate governance and capital markets, notably linked to ESG, and to implement relevant measures within their organisation.”