How company boards can be a vanguard for climate action

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Sharon Thorne, Global Chair, Deloitte

• Company boards can cut through the clutter and provide strategic direction on climate change.
• A recent Deloitte survey shows only half of board members consider themselves ‘climate-literate’.
• A new collaboration with the World Economic Forum aims to provide company boards with the needed resources.

Board directors and chairpersons are accustomed to navigating a changing and challenging landscape; from the global pandemic to geopolitics, from humanitarian crises to the climate crisis, and from the rise of tech to the Great Resignation, the role of boards in setting long-term strategic direction has perhaps never been more important.

When it comes to fighting climate change, the tides are literally rising, and time is running out. Identifying areas of maximum impact and applying effective governance is critical to preparing organizations to respond with the requisite urgency, and to seize the opportunities that exist in the global system transition that lies ahead. Business leaders must advocate to act now and steer their organizations toward a more sustainable future.

With a topic as complex as climate, a key challenge can be understanding where to focus efforts for greatest impact and which actions will result in long-term enterprise value. From a business perspective, boards of directors are particularly well-positioned to help their organizations break through the clutter and understand where they can be agents of change. To do so effectively, boards need to be prepared to ask the hard questions, and weigh the many climate-related risks and opportunities associated with sustainable investment.

Yet Deloitte’s recent Audit Committee Frontier survey found that barely half of the board audit committee members surveyed consider themselves “climate literate”, and half of the respondents in the survey do not believe they are well-equipped to fulfil their climate regulatory responsibilities. Two-thirds say their companies lack a clear strategy on climate.

Similar concerns surfaced among fellow board chairpersons in the World Economic Forum’s Community of Chairpersons during interviews and group discussions held late last year. Many expressed a real urgency to enhance knowledge of non-executive directors and step up the discussion on climate and sustainability on boards, as highlighted in the Forum’s paper The Chairperson’s Insights Into Climate Action.

This is why Deloitte is working with the World Economic Forum and the Climate Governance Initiative and their global network of Chapters to roll out a series of guides to help shape climate action on boards and help equip business leaders with the resources they need to take calculated steps towards a sustainable future.

Launching today, the briefing papers are part of an ongoing series of thought leadership designed to enhance climate competence and steward climate action by board directors across the globe, helping to educate and get chairpersons and their boards up to speed on stakeholder response, risk assessments and alternative decarbonization pathways:

• The Chairperson’s Insights into Climate Action: Highlights from interviews with chairpersons provides a summary of highlights from interviews with 16 members of the World Economic Forum’s Community of Chairpersons on the topic of climate action. It explores key issues and best practices for board members across strategy, risk and opportunity, stakeholders, board competence and operations in relation to climate. It provides perspectives on a number of complex questions covered during the interviews, and encourages chairpersons globally to ask these questions of themselves and their boards.
• The Chairperson’s Guide to Climate Stakeholders: Understanding how key groups are responding today and how they might respond tomorrow puts a spotlight on how key stakeholder groups are responding to climate change and how they might respond in the future. Chairpersons must be cognizant of the various economic and existential risks presented by stakeholder reactions to climate. The guide provides tools for chairpersons to consider in high-impact reaction scenarios to their company’s operations and gain a deeper understanding of how stakeholders influence each other. The paper helps navigate the complexities presented by a diverse stakeholder network and highlights the short-term trade-offs that boards will need to make.
• The Chairperson’s Guide to Decarbonization: Understanding the decarbonization roadmap focuses on the role of chairpersons and boards in developing a robust climate mitigation strategy. The paper informs chairpersons of the foundational knowledge for why businesses must address climate change and provides a roadmap to thriving in a low-carbon economy. Drawing on global case studies, the guide demonstrates the threats of not taking climate action, and the opportunities of embedding climate within company strategy.

I encourage board directors to share these resources with their networks, and to get involved with their local Climate Governance Initiative chapters.

What’s the World Economic Forum doing about climate change?

Climate change poses an urgent threat demanding decisive action. Communities around the world are already experiencing increased climate impacts, from droughts to floods to rising seas. The World Economic Forum’s Global Risks Report continues to rank these environmental threats at the top of the list.

To limit global temperature rise to well below 2°C and as close as possible to 1.5°C above pre-industrial levels, it is essential that businesses, policy-makers, and civil society advance comprehensive near- and long-term climate actions in line with the goals of the Paris Agreement on climate change.

Global warming can be beaten thanks to this simple plan

The World Economic Forum’s Climate Initiative supports the scaling and acceleration of global climate action through public and private-sector collaboration. The Initiative works across several workstreams to develop and implement inclusive and ambitious solutions.

This includes the Alliance of CEO Climate Leaders, a global network of business leaders from various industries developing cost-effective solutions to transitioning to a low-carbon, climate-resilient economy. CEOs use their position and influence with policy-makers and corporate partners to accelerate the transition and realize the economic benefits of delivering a safer climate.

Contact us to get involved.

Mission Possible Platform: Delivering industry pathways t…

This is a decisive decade. It is now or never to act successfully against climate change, and we must all get involved and take action. By increasing climate competency on boards and regularly convening to share learnings and best practices, boards can become a vanguard to usher in meaningful climate action within and beyond the companies they support.