The recent collapse of football's European Super League sheds an interesting new light on several perennial ESG questions around behavioural change. Once again, we're left asking whether companies today are choosing sustainability and better governance because they're passionate about improving their practices, or because they're required to by law? And are the actions of consumers and other stakeholders driving businesses' decision making instead?
Giving the 'G' in "ESG" its due
The governance aspect of ESG receives less airtime than its environmental component, however it's an area with some statutory footing. Law dictates that directors make their decisions in the best interests of their company, for the benefit of its members overall. That said, the owners and board of a company don't have carte blanche in terms of their control over a company.
By law, the board is required to factor in:
- the likely long-term consequences of any decision they make
- the need to foster the company's business relationships with suppliers, customers and others
- the impact of the company's operations on the community and environment, and
- maintaining the company's reputation for high standards of business conduct.
And when it comes to stakeholders' concerns, customer satisfaction is a key component that owners and board members can't overlook or forget – something the owners of the football clubs that signed up to the Super League were forced to accept. While an exceptional event, it’s a stark example of the mantra "the customer is always right".
Learning from the Super League's collapse
There are always lessons to be learned from failure, especially a high-profile event like the rapid collapse of the Super League.
Key takeaways to consider include:
- Removing success, achievement and competition from sport would seem to be prejudicial, and possibly fatal, to the interests of a sporting business.
- Customers, in this case the public, have the power to force the hand of even some of the largest and more powerful corporations.
- Government policy and legislation only goes so far where ESG compliance is concerned. The U-turn on the Super League probably wasn't motivated by concerns about company law, or a sudden board and shareholder passion to protect stakeholders' interests. Instead, it was likely driven by pressure from the wider network of stakeholders – a powerful illustration of the power of those outside the board and company shareholder structure to shape corporate action.
Find out more
To discuss the issues raised in this article in more detail, please reach out to a member of our Environmental, Social & Governance team.
