Source of article: Business Times

ON Feb 9, 2023, 11 directors at Shell, the oil giant, were sued for allegedly breaching their legal duties under the United Kingdom Companies Act for failing to implement an energy transition strategy that aligns with the Paris Agreement.

This is a landmark case being the first known attempt to hold corporate directors personally liable for the company’s failure to comply with international environmental protection convention. The lawsuit will be closely watched given the precedence it could potentially set for directors.

But while the jury is still out on the question whether directors have the social responsibility beyond maximising shareholder returns, lawyer Robson Lee says there are already a number of clear-cut areas of liability that directors should take heed of.

For one, the Board of a listed company would be in breach of its statutory duty of disclosure under securities rules and regulations if the company publishes a sustainability report that is not consistent with the group’s actual business conduct and operations, he says. 

That is because any deviation from what is published and disseminated to the market concerns a breach of the statutory and regulatory requirement that information disseminated to the market must be true, accurate and complete in all material respects, he points out.

Therefore, if there is no intention to abide by what the company publicly states concerning its environmental, social, and governance (ESG) policies and practices, the Board must be held accountable, states the partner at Kennedys Legal Solutions.