How can good governance help address climate risk?
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TACKLING ISSUES FROM THE TOP
EMBEDDING DECISION-MAKING WITHIN ORGANISATIONS
SETTING THE PACE ON STEWARDSHIP
There is no one-size-fits-all solution and approaches differ, depending on business needs and circumstances, but now numerous resources exist to help. These range from sustainability training offered by leading academic institutions to guidelines including the World Economic Forum’s paper entitled “How to Set Up Effective Climate Governance on Corporate Boards” 57 and the “Climate Change Boardroom Toolkit” 58 published by Chapter Zero, the Directors’ Climate Forum. Some companies have climate change issues as a standing full board agenda item, circulating in advance details of any upcoming decision with a climate change dimension in the board papers, and bringing specific expertise into their non-executive director pool. Some create dedicated climate change committees, while others ensure that climate risk is an agenda item on all its existing board committees, from audit, to nominations, to remunerations.
Climate change is a system- wide problem that needs a system-wide response. The best way to manage the risks is to work together. It’s in everyone’s interests to be part of the solution.”
Integrating board decisions into operational structures, so that top-level thinking is embedded organisationally and culturally is the next priority and ensuring climate- related issues are not seen solely as the remit of risk management is vital. Some companies build climate issues into their regular business planning while others run standalone projects, but whichever route is chosen, internal engagement is paramount. Businesses must find ways of turning the significant employee interest and concern that doubtless exists in all organisations around climate change into action that benefits the business and its staff simultaneously. Communicating clearly what the company is doing and inviting views and ideas can work well. Employees need to know what the strategy is, what is expected of them, how to report progress and when to refer issues up the chain of command. Linking remuneration to the pursuit of specific goals can also help incentivise behaviour.
A holistic approach on an internal level but also on an external one can prove invaluable. Businesses could benefit from looking outward to see what other organisations are doing and how suppliers are performing. Working with others to find better ways of doing things rather than being part of the problem could be enormously effective, in Nigel Brook’s view, an insurance partner at Clyde & Co. By building a sense of communal stewardship, not only can companies play their part in bringing about a worldwide transition to net zero, they will be better placed to ensure their businesses are still thriving in the decades ahead.
- Nigel Brook, Partner, Clyde & Co, London
57 World Economic Forum http://www3.weforum.org/docs/WEF_Creating_effective_climate_governance_on_ corporate_boards.pdf 58 Chapter Zero https://www.chapterzero.org.uk/wp-content/uploads/2019/11/Chapter-Zero-Final-Toolkit.pdf
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