62% of business leaders fear legal action for missing ESG targets, says survey

29 February 2024 , 11:05

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An aerial view of the Shotwick Solar Park on Deeside, Wales. The array of photovoltaic solar panels is spread over 250 acres and produces 72.2 mega watts per year and is also currently the largest solar farm in the UK

A report has revealed that UK business leaders are worried about facing legal action if they don't meet their environmental, social and governance (ESG) targets.

The study was carried out by consultancy firm Gallagher, who asked over 600 senior business leaders from large UK companies about their ESG goals. The results showed that nearly two-thirds (62%) of them were worried about their businesses being taken to court if they didn't meet these targets.

They were most concerned about switching to renewable energy sources, closing the pay gap between top bosses and lowest earners, reducing emissions and addressing gender inequality. Almost three-quarters (72%) said they felt pressured to set targets without knowing how they would achieve them.

Over half (54%) thought it was much more likely now than ten years ago that they could face legal action for not meeting ESG targets. When asked what worried them most about not meeting their ESG targets, nearly a quarter (24%) said investor withdrawal, 21% said legal action and 14% said shareholder activism.

More than a third (35%) said they set ESG targets to meet the demands of investors and shareholders. The research showed that most companies (66%) think people outside their business, like shareholders, industry bosses, the Government, everyone else, and other companies, push them to set goals for the environment and society.

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But over three quarters (77%) of them believe these goals help their business do well. James Bosley, head of climate strategy at Gallagher: "Increasing amounts of regulation relating to climate change, social goals and corporate governance present growing challenges for companies, compounded by increasing shareholder activism.

"These findings highlight the need for businesses to consider their risk model alongside their ESG ambitions and ensure that they are both comprehensive and robustly formulated. The speed of change for ESG issues has resulted in a lack of standardisation and precedent, creating uncertainty for companies trying to address their specific needs."

Lawrence Matheson