Abstract
The multilayered regulatory framework for globalized business is rapidly evolving. International law, principles, and guidelines are increasingly becoming directly relevant for corporate decision-makers. Corporate governance norms are evolving. The international trend of lawsuits is challenging established positions in company law and contract law. The significance of national law is diminishing, and companies cannot avoid sustainability by selecting an ‘anti-ESG’ (environmental, social, and governance) jurisdiction, one that is against ESG considerations in corporate governance, as their home base. For board members, senior executives, and their lawyers, this means that their roles and duties are changing, too. In this article, we explain what this entails for corporate governance in a changing world. Notwithstanding ‘ESG’ pushback and ‘Omnibus’ proposals, sustainability as an integral element of the regulatory framework is here to stay. The financial and corporate risks of unsustainability are not adequately included in the prevailing approaches to ‘sustainability risks’, assessed from a sustainability-research perspective. We outline what transition risks, physical risks, and societal risks entail and how these can be mitigated. We discuss the unprecedented changes in EU laws and policies, notably the changing nature of reporting and its relation to due diligence. The regulatory framework is still insufficient and fragmented, with resulting corporate governance challenges. However, by positioning the understanding of and the compliance with the regulatory framework as it is within a research-based understanding of corporate sustainability, the challenges can be mitigated and transformed into opportunities for a business. We elaborate how boards can mitigate ‘sustainability risks’, including liability risks for the individual board members, and realize opportunities in creating sustainable value.
Beate Sjåfjell and Jukka Mähönen, 'Sustainable corporate governance for boards and their lawyers', in Sam De Silva, and others (eds), Expert Essentials (Oxford, online edn, Oxford Law Pro, 14 May 2025 - ), https://doi.org/10.1093/9780198972877.003.0048.