Sustainability in the Middle East Directors’ Duties

Sustainability, and its constituent elements of economic, environmental, and social performance,¹ have increasingly become a boardroom issue for directors around the world. In part, growth in attention to this issue has been driven by environmental factors and the impacts of climate change. The United Nations Sustainable Development Goals (SDGs) have clearly emphasised the need for urgent action in this respect.² However, a focus on sustainability within corporations also reflects ongoing developments in the long evolution of a wider stakeholder/shareholder debate. This debate questions the purpose of corporations, and what weight should be given to the relative interests of shareholders and stakeholders by directors when discharging their duties to the companies they govern.³ Hostility towards corporations has prompted increased questioning of corporate purposes and a rejection of a narrow focus on shareholder returns. Short-term approaches by corporations have been linked to a shareholder-wealth focus, while longer term more sustainable perspectives have been seen as more readily accommodating consideration of broader interests.⁴ Increasingly, demands have been made that corporate actions take into account impacts on a wider range of societal interests and stakeholders.⁵ This has been so particularly in relation to environmental impacts but also more broadly. These pressures have pointed to the need for increased clarity in relation to the purpose of corporations and change directed towards enabling a resurgence of public trust in business ‘to ensure the continued success of the corporate model’.⁶ Concomitantly there has also been an acceleration of ‘[p]ressures on corporations to establish and maintain high standards of internal governance’.⁷