- Boards of directors are naturally positioned to help businesses prioritise climate action.
- Boards take a long-term view and hold management accountable for delivering on goals.
- Boards can drive collaboration.
“A code red for humanity.”
That’s how UN Secretary General António Guterres described the recent climate projections from the Intergovernmental Panel on Climate Change (IPCC). The report was published during a summer that brought historic, deadly flooding in western Europe and China, uncontrollable fires in the Mediterranean and the western United States, and heat in the Pacific Northwest of the United States so extreme it melted cables and buckled roads. The report projects such disasters will soon be far more common – and far more severe.
Yet in spite of countless warnings and reports, we are still not seeing the kind of decisive action needed to combat this crisis.
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While COVID-induced lockdowns initially brought unexpected environmental benefits, nearly two-thirds of executives in Deloitte Global’s 2021 climate survey reported the pandemic and resulting economic downturn caused them to cut back on their organisation’s sustainability efforts. At a moment when sustainability actions need to significantly accelerate, many organisations were forced to take a step back. At the same time efforts were pulled back, over a quarter of executives surveyed indicated their organisations were already feeling the operational impacts of climate change.
Businesses must prioritise climate change risks – and boards of directors are well positioned to help lead the charge.
Why is that? Well, taking on climate change requires three important things:
- Long-term thinking in a world dominated by short-term pressures.
- Greater trust in the institutions that can lead large-scale change – at a time when this trust is deemed to be at record lows.
- Unprecedented global collaboration.
Significant challenges, all – yet precisely the areas where boards have the power to help companies excel.
Taking the long-term view
Humans naturally tend to be poor at thinking long term, and current business practices can exacerbate this tendency. When the next quarterly earnings report is perpetually right around the corner, it is understandable that the next quarter century could fade easily from an executive’s focus.
Boards, however, are charged with taking a longer view: understanding future risks and opportunities, and ensuring the organisation’s present strategy is setting it up for long-term success. And as boards look to the future, now, there is consensus that climate change poses a serious threat to all businesses – from natural disasters disrupting operations, to resource scarcity and biodiversity loss threatening supply chains. The businesses likely to be most resilient in this uncertain future will be those that act now to build sustainability into every aspect of their operations.
It’s incumbent upon boards to help shape this long-term strategic vision and oversee the roadmap of actions management will take in the shorter term to achieve it.
Building trust and accountability
Of course, boards have the ability to help lay out this roadmap and hold management accountable for delivering on it.
Currently, climate misinformation and incidents of greenwashing have led to skepticism over whether businesses are committed to climate action. Boards can play an important role in helping their organisations take steps that re-establish basic trust with key stakeholders.
That starts with helping to ensure that business leaders, and their employees, have a universal foundation of knowledge about climate change to understand the true impact their organisation’s actions are having on the planet as well as steps they can all take to reduce their carbon footprint.
What is the World Economic Forum doing to help companies reduce carbon emissions?
Corporate leaders from the mining, metals and manufacturing industries are changing their approach to integrating climate considerations into complex supply chains.
The Forum’s Mining and Metals Blockchain Initiative, created to accelerate an industry solution for supply chain visibility and environmental, social and corporate governance (ESG) requirements, has released a unique proof of concept to trace emissions across the value chain using distributed ledger technology.
Developed in collaboration with industry experts, it not only tests the technological feasibility of the solution, but also explores the complexities of the supply chain dynamics and sets requirements for future data utilization.
In doing so, the proof of concept responds to demands from stakeholders to create “mine-to-market” visibility and accountability.
At Deloitte, we recently rolled out a climate learning program for all 345,000+ Deloitte professionals as part of our WorldClimate strategy to empower and inspire our people to take climate action. Already, we have seen that establishing this shared base of understanding has led to more productive conversations, stronger climate leadership and more sustainable choices.
Board members overseeing climate strategy for entire companies require an even more sophisticated level of understanding. Chairs will need to ensure that board members have the knowledge and skills to ask management the right questions about sustainability progress, and push them to report on it clearly, consistently and comprehensively.
That’s no easy task – but fortunately, they won’t have to do it alone.
Any serious effort to take on global climate change will require, as former Unilever CEO Paul Polman puts it, “radical collaboration” – leaders coming together to share best practices, inspire greater commitments and work together to address the climate challenges facing us.
Board members are naturally positioned to help lead these efforts. And the good news is that they are already taking action. For instance, the World Economic Forum’s Climate Governance Initiative, a growing community of non-executive board directors with chapters in over 20 countries, helps educate, mobilise and equip boards with the tools they need to lead their organisations to a net-zero carbon economy.
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Even industry competitors are turning to collaboration to pursue sustainable solutions. Earlier this year, Deloitte joined over 60 business leaders, including leading competitors, at the World Economic Forum to develop and commit to a global, systemic solution for ESG reporting. These metrics will give stakeholders, suppliers and shareholders a common language as they work together toward sustainability goals.
Tackling climate change is emerging as one of the greatest tests humanity has ever faced. Yet short-termism, mistrust and segmentation are challenges organisations have been dealing with for years – and challenges boards were specifically designed to help solve.
Boards and their chairs have the power and the responsibility to lead us through this moment of trial – and leave a legacy worth inheriting.