Environmental, social, and governance : a new imperative for directors in Zimbabwe

Abstract

The ESG movement has invaded the corporate landscape with such earthshattering velocity. ESG entered into the corporate space through both legal and non-legal initiatives. Increasingly, directors are no longer seen as delegates of shareholders whose primary objective is to pursue the interests of shareholders of profitmaximization. Rather, under the ESG lens, directors have a responsibility to pay due regard to environmental, societal, and governance concerns as they lead their companies. Some of the key characteristics of ESG include stakeholder governance and sustainability. The jurisdictions that have been in the lead on the ESG movement include the European Union, the United Kingdom, France, and the USA. Zimbabwe has not been left out of the ESG movement. The Companies and Other Business Entities Act [Chapter 24:31], the Public Entities Corporate Governance Act [Chapter 10:31], and the Securities and Exchange (Zimbabwe Stock Exchange Listings Requirements) Rules, 2019 ushered in a new era as far as ESG is concerned in Zimbabwe. Directors need to be cognizant of the interplay between their duties and ESG concerns. Directors may be found in breach of their fiduciary and other obligations for failure to pay due regard to material ESG issues. By paying due regard to material ESG issues, directors harvest a plethora of benefits for their companies. Among other benefits, ESG ensures that risks are tracked, opportunities are maximized and the creation of value is optimized. However, the Zimbabwean ESG legal framework is not without its shortcomings. This study exposes some of the shortcomings and makes the necessary recommendations