Senior leaders’ personal liability at risk if businesses fail on environmental initiatives

Almost half (42%) of senior business leaders have said they are worried they could be found personally liable for their business failing to deliver on environmental initiatives or by reporting climate related exposures, according to a study from QBE Insurance.

The research – which surveyed 500 senior UK decision makers – also revealed that one in five (21%) said they felt their company needed to do more to keep up with their competition in terms of ESG, with one in ten saying their company had already faced reputational risks or increased scrutiny on their ESG framework. While nearly a third have said that they have increased their focus on ESG over the past year there were 15% of respondents who said their business had no initiatives in place at all.

Rebecca Lowe, senior underwriting in financial lines at QBE Europe, said: “There is the potential for claims and litigation if a business promises to work towards a certain target and falls short and the decision makers involved could be held personally liable. There is also a potential for claims from ‘greenwashing’, where stated ESG initiatives are not as robust or as beneficial as they would lead customers and investors to believe.”

“It is likely a matter of time before the current environment catches up with underprepared senior decision makers. They need to make sure they are putting the right framework in place now and then continue to act to stay ahead of the latest regulation, rules and targets.”

While 35% of survey respondents identified environmental, social, and governance (ESG) as one of the top priorities within their business, an almost equal amount (29%) said it was not of great importance at all.

Survey results showed that senior leaders are concerned about their personal liability within their role more broadly. Nearly half (48%) of those surveyed said that their personal liability within their role has increased in the past 18 months. Out of those who have already had a claim made against them, nearly three quarter (72%) were in the past year. However, just over a third (35%) believed they were adequately covered by insurance, while a fifth said they wished more structures were in place to protect them in their role.

Lowe added: “Senior leaders are increasingly being held to account when a business issue arises and, as a result, falling short of ESG targets and governance will lead to claims. This also builds upon recent trends we have seen in social inflation where strong opinions on the performance and decision making of senior leaders manifest in them increasingly being held personally accountable for their actions.”

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