Boards ‘Still Not Walking The Talk On Climate Change’

Roger Trapp


Even with the pandemic and the latest variant filling the news headlines, there is still a lot of talk about climate change. Just how much is illustrated by a report out this week from leading leadership advisers and recruitment consultants Heidrick & Struggles in partnership with INSEAD, the France-based international business school.

Entitled Changing the Climate in the Boardroom, the report was compiled in the weeks leading up to October’s COP26 conference in Glasgow and looks at corporate executives’ take on climate change itself, what boards around the world are currently doing to address it and what they should be doing in the future. It finds a clear disconnect between what board members say about the importance of climate change — 75% understand that climate change is very or entirely important to the strategic success of their companies — and what they are actually doing about it — 43% say their companies do not yet have clear targets for reducing carbon emissions.

The finding that 75% of board members understand the importance to the strategic success of their companies is an improvement on the results of INSEAD’s 2019 qualitative research project What’s Stopping Boards from Turning Sustainability Aspirations into Action?, which indicated complacency, entrenched attitudes, lip service, greenwashing and even downright denial of climate change. But nevertheless, nearly half of those surveyed felt their boards had insufficient or no knowledge of climate change’s implications for financial performance.

Louis Besland, partner in the London office of Heidrick & Struggles, said: “Not all board members have sufficient knowledge and understanding of sustainability, which is why it is imperative that the issue is built into recruitment, education and reward processes. Knowledge in this area is key in making an actual difference. When a board establishes that it needs a climate expert on the board itself, board chairs, lead directors and members who embrace innovative methods will build a better company and world around it.”

Sonia Tatar, executive director at the INSEAD Corporate Governance Centre, which led the survey from the school, added that climate change was becoming an increasingly urgent dimension for organizations to address as part of their strategy on environmental, social and governance issues. Investors, she pointed out, were prioritizing organizations whose actions were combating climate change and stakeholders were urging boards to be climate change stewards. Accordingly, there can be no place for boards that are not acknowledging these changes and taking steps to put their companies in the vanguard of what looks an increasingly tough battle.

Alice Breeden, another partner in Heidrick & Struggles’ London office and a member of the global leadership team, said:“Chairs have a particularly important role to play to ensure the right tone is set in the boardroom....The chair should ensure climate is treated as a priority, ensuring open and honest discussion about it and encouraging deep reflection on how quickly the board and company can do even better.”

She acknowledges that “the role of the chair may need to be challenged and re-thought in some cases.” This is surely something of an under-statement. Given the comparatively short timeframe that governments — let alone customers and other stakeholders — are setting for real action on climate change, a lot more than tweaking the role of the chair of the board needs to happen. To be fair, the report also recommends:

  1. Including climate change in the board’s competency matrix and making sure the whole board has sufficient knowledge of the issue.
  2. Adding more relevant voices to the boardroom.
  3. Changing the board processes and dynamics — a responsibility for the chair.
  4. Anchoring the climate change strategy in social and organizational purposes and connecting it to specific operations.
  5. Integrating the climate change objectives into executive compensation and search strategies, especially for the CEO.

However, such initiatives and actions are surely just the start. The virus is obviously taking up a lot of executive time at present, but if only businesses and their leaders could rise to the challenge of combating climate change in the way that they have embraced digitization and flexible working in the fight against the pandemic then something worthwhile might happen.

Comments

  1. Worth noting these are European companies. I doubt North American companies would even be close to this level of awareness.

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