Businesses have traditionally assessed their climate risks primarily by reference to regulatory compliance requirements and related costs. However, recent developments in the law, regulation, and corporate governance suggest that businesses need to have a broader understanding of their responsibility for mitigating the effects of climate change and the potential risks to their business. This case sets out examples of four such recent developments: a Dutch court ordering Royal Dutch Shell to reduce its greenhouse gas emissions; successful shareholder activist campaigns at Chevron and Exxon; and regulators’ scrutiny of listed company climate disclosures. The case highlights pressures from regulators and law courts in enforcing emissions reductions more strictly than previously and the greater litigation risk that corporations will face going forward. In addition, there is growing pressure from shareholders advocating that their corporations have a climate policy in line with international regulations and norms, which the senior management of corporations is taking seriously. The case provides the reader with an insight into the real issues of environmental, social, and governance (ESG) issues that senior management will need to resolve. This case places readers in the position of the board of a fictional global energy conglomerate and invites them to consider how these developments impact the company’s strategic thinking and corporate policies. The case encourages discussion of corporate strategy, risk management, public relations, and investor communications in the context of ESG issues and aims to broaden students’ conceptual framework of these key issues.
This case is designed for use in a general Environmental, Social, and Governance (ESG) course for business students. It might also be productively employed in general management and strategy, company/business law, or corporate communication courses.
The case is intended to encourage students to actively engage in ESG issues beyond the basic levels of regulatory compliance and corporate reputation management. It also prompts students to develop a broader understanding of legal and regulatory risk. Learning outcomes should be that students achieve a more holistic understanding of ESG and its impact on business, strategy, and stakeholder communications.
The learning objectives of the case are as follows:
- Students will be able to recommend business strategies to account for the impacts of climate change by analyzing regulatory compliance requirements, risk management, public relations, and investor communications in the context of ESG issues.
- Students will gain an understanding of the legal liabilities in relation to climate change as well as their nexus with financial, reputational, and operational risks arising from climate action versus inaction.
- Students will gain an appreciation for the relationship between corporate communications and reputation management, on the one hand, and legal liabilities, on the other hand, and gain practice in formulating strategies that account for all aspects holistically.
The case is suitable for students at all levels (undergraduate, graduate, and executive programs).