In the year of COP26 much is expected of business. Countries will only be able to meet their Net Zero targets with substantial corporate innovation, with companies playing a significant role in reducing emissions. For many organisations meeting Net Zero will require radical change in products and business models, and the way forward already has implications for the skill sets needed in today’s Boardrooms. Indeed the media is questioning whether Boardrooms are ready, with Pilita Clarke of the FT arguing that “Too many boardrooms are climate incompetent”.
Closing the Gap
At Fidelio we agree the climate challenge ahead is enormous, but we are also more optimistic about climate competence in the Boardroom. Yes, a gap exists, but we see encouraging signs that Boards are seeking to close that gap.
- Firstly, there is already a genuine appetite to learn: many Board Members are taking proactive steps to come up to speed on climate change and its implications for the companies they serve. For example, look at the work of Chapter Zero and its membership (full disclosure, one of Fidelio’s leadership team is a Steering Committee and Board Member). In Fidelio’s Board Evaluation and Development assignments, we see Boards across a range of sectors seeking to embed ESG – and in particular the pathway to Net Zero – within the Board Agenda.
- Secondly, we have seen a striking sea change in the corporate responses to climate change over the last two years, and signs of movement even in those firms which had previously been slow to embrace the issue. It may even be that the Covid-19 pandemic has heightened our collective understanding of the fragility and impermanence of our world, including at Board level. There is already significant climate competence in industries in the carbon front line, ranging from miners to automotive firms which have been grappling with the reality of emissions reduction for years, and this now also includes those involved in renewable energy as suppliers and operators of tomorrow’s power technologies.
The financial world has also woken up to its role, not just in decarbonising operations – a relatively straightforward task for most financial services firms – but in the funding and investment decisions which shape the future of business. Climate change competence is becoming a requirement for the Boardrooms of financial services companies and as TCFD reporting becomes more widespread (the UK plans to make it mandatory by 2025), the financial services industry will acquire extraordinary influence in the path to Net Zero.
In recognition of the complexity and scale of the challenge presented by climate change, many Boards are also setting up Sustainability Committees. Over half of the largest 100 companies globally now have one. Yes, the Board must assume accountability for Sustainability and Net Zero targets and the role of the Sustainability Committee does not diminish or undermine that; on the contrary, if well chaired and with the requisite expertise these committees will:
- Cut across internal silos
- Help the work of the Board in galvanising change
- Align remuneration with sustainability and Net Zero objectives
- Ensure climate change competence at Executive, Committee and Board level
Fidelio clearly sees in our Search assignments and composition discussions with Chairs a major interest in the skills and experience required for the Sustainability Committee and in particular for the Committee Chair role.
Climate change creates unprecedented challenges for Boards; corporates almost certainly hold the key to the level of innovation and radical thinking that is essential if we are to have a hope of meeting Net Zero targets.
Fidelio is focussed on building the competence at Board level that will provide the governance and oversight for the biggest transformation programme that humanity has known. Themes that we will explore and expand upon over the coming weeks include:
- The Role of the Sustainability Committee Chair
- Audit Committee and TCFD
- Board Liability and Climate Change
- The Skill Matrix and Net Zero
- Evaluating Climate Change Competence
Fidelio is committed to building better Boards. We provide practical solutions to complex challenges through:
- Composition – Search (Board and Executive) / Diversity
- Effectiveness – Evaluation / Development
- Alignment – Strategy / ESG / Engagement
If you would like more information on how Fidelio Partners can assist you in building climate change competence in your Boardroom, contact Gillian at firstname.lastname@example.org.