We are facing a climate emergency: how can boards take action?

Earlier this week, over 11,000 scientists from 153 countries issued a dire warning about the state of global warming. The warning, released on the 40th anniversary of the first world climate conference, is accompanied by a wealth of supporting evidence, including troubling statistics on population growth, loss of tree cover, greenhouse gas emissions and energy consumption from the last four decades.

The resounding message is that the world is facing a climate emergency, and there could be “untold suffering” for all of humanity unless we take extreme measures to protect the planet. Bill Ripple, professor of ecology at Oregon State University and co-author of the paper, says: “climate change is more severe and accelerating faster than was expected. Many of us feel like the time is running out for us to act.”

What needs to be done?

The report outlines several steps that we need to take to try to mitigate some of the catastrophic effects of climate change. Collectively, we must:

• Implement massive energy efficiency practices and move to low-carbon renewables.
• Reduce emissions of climate pollutants, such as methane and black carbon.
• Restore ecosystems, such as reefs, forests, and grasslands and prevent habitat and biodiversity loss.
• Reduce our consumption of animal products and eat mostly plant-based foods.
• Shift away from focusing on GDP growth and instead prioritise sustainable ecosystems and human well-being.
• Stabilise and reduce the world population.

While the picture is certainly alarming, there is hope. One of the lead author’s, Dr Thomas Newsome from the University of Sydney, says: “while things are bad, all is not hopeless. However, avoiding disaster will require swift, decisive, and large-scale action from institutions, governments and individuals."

Where do boards come in?

Boards have an indispensable role to play in addressing the climate emergency. They can set corporate climate agendas, modify outdated and unsustainable business models, and create a culture of environmental responsibility from the top-down.

To aid in this process, The World Economic Forum developed a set of climate governance principles. These principles, launched in January 2019, are designed to help board members raise awareness of climate strategy, increase board-level understanding of climate risks and opportunities, and enhance the “climate competence” of executive and non-executive directors.

Principle 1: Take accountability

Boards are accountable to shareholders as stewards of the long-term success of the company. It follows that boards should be accountable for how the company prepares and reacts to the effects of the climate emergency.

Principle 2: Make sure board members have command of the climate subject

This one is simple: all board members should be sufficiently educated in climate-related risks and opportunities. This allows for meaningful debate on climate issues that can lead to decisive action.

Principle 3: Embed climate considerations straight into the board structure

Boards should embed climate considerations directly into their structures. This can be achieved by creating climate-specific committees or hiring/electing a dedicated climate director.

Principle 4: Conduct ongoing assessment of climate risks and opportunities

The board should make sure that senior management conducts ongoing assessments of climate-related risks and opportunities in their business.

Principle 5: Integrate the climate into strategic and organisational decisions

The board should make sure that the climate emergency informs strategic planning and decision-making processes throughout the organisation. Similarly to the board structure, climate should be deeply embedded in the way all business functions and groups make decisions and plan for growth.

Principle 6: Incentivise!

The board should make sure that the incentivisation packages for executives include climate-related targets in addition to financial targets.

Principle 7: Transparently report and disclose climate-related issues

The board should make sure that material climate-related risks, opportunities and strategic decisions are transparently reported to all stakeholders.

Following Suit

Since the launch of the principles, directors from around the world have set up networks and task forces to test them, share feedback and challenges, and work towards establishing best practices.

For example, in the UK, nearly 200 NEDs come together annually for Chapter Zero, the Directors’ Climate Forum. The forum organises conferences and workshops and has a ‘Directors’ toolkit’ to help boards fight the climate emergency. There are similar groups for executive and non-executive directors in the Americas, across Europe and Australasia.

Time for Action

While these principles are still being developed and tested, they provide a useful roadmap for directors and executives to begin to integrate climate change considerations across their organisations.

There is no time to waste in confronting the climate emergency, and change needs to start from the top-down.

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