The role of directors’ duties and their relationship with non-financial reporting in achieving environmental sustainability

Overview

This is an opportunity to conduct fully funded interdisciplinary research under the Sustainable Transitions Leverhulme Doctoral Training Programme at the University of Essex.

The project provides the opportunity to analyse directors’ duties and the relationship that they have with non-financial reporting in achieving net zero outcomes for the environment.

Directors’ duties are an extremely important component of company law in all jurisdictions of the world. They influence the way that businesses make decisions, formulate strategies and consider ‘externalities’ such as the environment. Directors’ duties generally require decision-makers within companies to act in the best interests of the companies themselves and do not require companies to achieve specific outcomes for the environment, such as net zero carbon emissions, biodiversity loss, waste and pollution.  In recent years non-financial reporting has developed, whether that be through mandatory schemes or one of the many voluntary schemes. Non-financial reporting can play a critical role in the field of corporate accountability relating to sustainable development and net-zero targets, however the relationship between directors’ duties and non-financial reporting  in achieving sustainable development  has not yet been fully explored.

This project would examine the linkages between directors duties and non-financial reporting to consider how reform could improve outcomes for environmental sustainability.

Interdisciplinary focus

The interdisciplinary nature of the project would lie in the need to adopt different types of methodologies to tackle core research questions. Whilst traditional forms of legal analysis would be used to consider the law itself, various types of content analysis, derived from the accounting discipline, would be used to assess different characteristics of non-financial reporting.

Training and support

You will be supported through the Sustainable Transitions training programme which provides initial training in interdisciplinary research methods, training in the secondary discipline within the project area, and ongoing training throughout the duration of the programme. All doctoral scholars benefit from the support of Proficio, which entitles you to £2,500 that can be used to purchase training courses either within or external to the University.

Additionally, all scholars are entitled to an additional £10,000 that can be used to cover research costs and further training. Doctoral scholars are encouraged to audit/attend University masters and degree level courses where appropriate. You will also have the support of the Sustainable Transitions management team as well as your own supervisory team. All Sustainable Transitions scholars will become part of the University of Essex Centre for Environment and Society through which ongoing events and networking opportunities are available.

Person specification

This opportunity would suit a candidate with a degree/ background in law. In particular legal scholars who have studied corporate law and/or corporate responsibility at masters level may be well suited. It is not necessary for the candidate to have prior training in business and accounting, as training can be provided on the programme. However, an active willingness to learn new non-legal methodologies would be useful.

Research proposal

The project area is broadly defined, leaving scope for the applicant to develop their own specific research proposal as part of the application. The successful candidate will further develop their proposal in close consultation with the supervisory team.

Supervision

The primary discipline supervisor takes the lead responsibility for supervising the project. For further detail relating to supervision see the Guidance for Applicants (.docx) document.

Additional background information

Directors’ duties are an important component of company law. They ensure that decision-makers within companies make decisions that are consistent with the ‘best interests of the company’. Traditionally the notion of what amounts to the best interests of the company has been understood to represent the financial or commercial interests of a company, or what will achieve commercial success. This is understandable as safeguards need to be in place to ensure that investors’ funds are used to achieve profit. However, it is also the case that businesses are responsible for a significant proportion of the harm that is caused to the environment globally and that degradation often has negative impacts not just on the environment itself but on a range of associated human rights too. Therefore, it can be argued that unrefined or unrestrained director’s duties can have a negative influence on the environment and that this needs to be addressed.

One of the developments of the last three decades within the field of corporate responsibility is the concept of non-financial reporting. This has developed in many jurisdictions of the world. In some instances, it is required by law but there are many other examples where it is undertaken voluntarily by companies through participation in non-mandatory reporting schemes. Non-financial reporting has become a significant tool that can be used by governments, civil society and companies themselves to leverage accountability concerning the ‘externalities’ related to business enterprises. Progressive developments in this field have raised several concerns regarding the effectiveness and accuracy of non-financial reporting. These concerns include inconsistencies due to a lack of standardization, risks of greenwashing, cost and resource demands, and challenges in defining and measuring social and environmental performance. Such issues cast doubt on the ability of non-financial reporting to genuinely promote sustainable development.

The analysis of directors’ duties on the one hand, and non-financial reporting on the other, are often undertaken independently of each other. Directors’ duties tend to face scrutiny from lawyers through legal analysis. Whereas the quality of non-financial reporting is assessed by a separate type of analysis that is usually conducted by accountants or business specialists with expertise in that field. Therefore, examinations that combine and synthesise approaches and methodologies from both disciplines are extremely rare. This is unfortunate, as there is a clear relationship between these two areas. For instance, if directors’ duties were amended to require less negative environmental impacts or adherence to ‘net zero’ standards, it would directly influence the requirements of non-financial reporting. Conversely, if non-financial reporting adopted a more consistent approach, offered broader coverage and provided more accurate results, it could serve as a strong foundation to support reform of directors’ duties around the world.

This is an important project that will conduct a synthesised analysis of both directors’ duties and non-financial reporting, with a view to understanding clearly the relationship between the two and provide a platform from which practical reforms and solutions can be put forward.

How to Apply

Full details available at Sustainable Transitions Leverhulme Doctoral Training Programme.

Supervisory team references

1. Stephen J. Turner, ‘Business, Human Rights and the Environment—Using Macro Legal Analysis to Develop a Legal Framework That Coherently Addresses the Root Causes of Corporate Human Rights Violations and Environmental Degradation’ (2021) 13 Sustainability, 12709.
2. Stephen J. Turner, Corporate Law, ‘Directors’ Duties and ESG Interventions: Analysing Pathways towards Positive Corporate Impacts Relating to ESG issues’ (2020) 4 JBL 245.
3. Stephen J. Turner, ‘A Global Environmental Right’ Earthscan by Routledge (2014)
4. Cuomo, F., Gaia, S., Girardone, C. and Piserà, S., 2024. The effects of the EU non-financial reporting directive on corporate social responsibility. The European Journal of Finance, 30(7), pp.726-752.
5. Baboukardos, D., Gaia, S., Lassou, P. and Soobaroyen, T., 2023, April. The multiverse of non-financial reporting regulation. In Accounting Forum (Vol. 47, No. 2, pp. 147-165). Routledge.