In Montana, a groundbreaking case of climate litigation has the potential to change legal precedent for climate change lawsuits around the world. Held v. Montana is a youth climate case filed in 2020 by a group of children and teenagers who ranged in age from toddlers to late teens. It is the first youth climate lawsuit in the country to go to trial, as previous cases were dismissed by judges who felt climate change was an issue for legislatures rather than courtrooms to address. Montana’s constitution includes a clause on the right to a healthy and clean environment, and Held v. Montana argues that the state has violated its constitution by failing to protect that right. The outcome of this trial will have significant impacts around the world by redefining the legal precedent for climate lawsuits. 

More and more climate change lawsuits are being filed around the world each year, and businesses that are not prepared for such challenges open themselves up to significant litigation risk. In order to act proactively rather than reactively, business leaders must be educated and knowledgeable. Our world-class ESG and Climate & Biodiversity programs for boards and business leaders are an excellent way to do that.

1. Ethics falling to the wayside as artificial intelligence development speeds up. Companies are increasingly incorporating artificial intelligence (AI) into their business practices, but Alexandra Johnson from the Institute of Business Ethics shared that almost 50% of the United Kingdom’s 250 biggest companies do not have a publicly accessible AI code of conduct, and 43% of the AI ethics codes are “judged below par”. There are significant risks to AI usage that are well documented such as racial profiling, difficulties recognising darker skin tones, online banking fraud, plagiarism of art, problems with self-driving vehicles, and more. Companies that lack strong AI governance and are not transparent about their AI usage may find themselves unintentionally harming consumers and employees. The Organisation for Economic Co-operation and Development and European Commission have both released ethical guidelines for AI usage, which are an excellent place for companies to start when creating AI ethics standards.

2. A decade marked by a wave of ESG regulation. Since 2011, over 1200 new environmental, social, and governance (ESG) laws have been introduced around the world, a huge jump from the approximately 500 laws passed between 2001 and 2010. Analysis shared by ESG Book found that there has been a nearly 650% increase in ESG laws, a number that is only expected to grow in the future. Despite the growing vocal backlash against ESG, governments around the world are continuing to introduce new regulations to ensure companies are acting ethically and sustainably. 

3. Cybersecurity regulation around the corner. The United States’ Securities and Exchange Commission (SEC) cybersecurity guidelines are expected to be implemented in the fall of 2023. Companies must be prepared to avoid getting caught flat-footed by the new cybersecurity laws. The new laws will increase organisations’ liability in shareholder derivative claims, opening companies up to new risk if they do not develop more stringent cybersecurity protocols. There are several steps boards can take to prepare for this fall:

  • Create a cybersecurity committee on the board and ensure they report to the full board consistently
  • 90% of organisations have their chief information security officer (CISO) report to the board on a regular basis to discuss cyber risk. Making sure that the CISO and board are in communication is essential to a strong cybersecurity strategy
  • Simulate cybersecurity incidents so that board members know how to respond in the event of an actual breach

4. ESG investing trade-offs are a misconception. A new report published by Morningstar concluded that there are no adverse long term negative impacts to ESG investing. The idea that pivoting to ESG investing leads to lower returns can be put to rest, with ESG funds analysed receiving better returns on investment than traditional funds. The only drawback for ESG funds was in the short term due to status-quo bias, but these are made up for by greater returns over ten years. However, it is not as simple as just picking any ESG fund to invest in. There is an oversaturation of ESG funds at the moment and the difficulty lies in picking a winner. 

5. C-suite barometer 2023. Mazar’s annual C-suite barometer report outlines a number of interesting trends for c-suite executives. Their findings include that:

  • 86% of executives are optimistic about their growth outlook for 2023 despite global challenges
  • The three biggest trends for companies to keep an eye on in 2023 are the cost of living crisis, energy pricing and shortage issues, and new technological advancements. 37% of surveyed organisations felt they were confident in their ability to manage these challenges
  • 32% of companies are prioritising “transforming company IT/technology” in the next decade, while 29% identified new sustainability strategies as their top priority. 25% named employee attraction and retention as their number one focus

Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.

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