To many executives it might seem that the Sword of Damocles hangs over their businesses when climate change is mentioned. As time moves on and public concern over the environment deepens, organisations that are failing to embrace the issue and take responsibility should rightfully feel a sense of impending doom.
On Day Two of Criticaleye’s Non-executive Director Retreat, in association with Brewin Dolphin
, a panel discussed how companies ought to embrace climate change as an integral part of strategy and turn it into a potential opportunity.
“Businesses are the only organisations that can really solve climate change,” Andrew Minton
, Managing Director at Criticaleye, said. “Governments can lay down rules and investors can create pressure, but businesses need to take the lead.”
It’s more fundamental than adding solar panels or having sustainability strategies, Andrew
continued, quoting Mark Carney, the Governor of the Bank of England
, who asserted that if companies continue with business as usual, without adapting to the shift towards a net zero world to combat emissions and climate change, then they will be wiped out.
“It’s an existential threat and it’s our responsibility to deal with it as being central to our strategies,” Andrew added.
It’s a view supported by Karina Litvack
, Non-executive Director at Italian oil and gas company Eni SpA, who expressed optimism about the level of conversation on climate change in the UK between business and policymakers compared to the US, which she described as being “fundamentally allergic” to interfering in the market.
“Government is not going to fix this by itself so we, in the boardroom, have a tremendous opportunity to play a constructive role and shape the environment in which we operate,” she said.
“What you need is business leaders to come out and say we need help, we need to do more, we need to sit down with our peers and with public policy decision makers and decide together how quickly and how hard we can push this.”
, Senior Independent Director at Marshall Group and a founder of Chapter Zero, the climate forum for Chairs and NEDs, argued the marginalisation of specialists with strategies around CSR, sustainability and climate change has been an historical problem. Rather than being consigned to ‘buckets’, she said these various components are relevant and feed into all business functions.
“All Board members need to recognise this is as mainstream as risk management, balance sheet testing, capital projects or strategy,” Julie said, citing Section 172 of the Companies Act and the onus it places on NEDs. “Not everybody has to be a passionate environmentalist, but they need to have the knowledge that they might have needed for digital or for cyber security, to be able to fulfil their role as a Board director.”
From her 20 years of Board experience, Julie has seen how challenging it can be for an executive team to bring difficult topics to the boardroom.
“Competition for time in the boardroom is so intense – we’re all driven by the quarterly or half-year earnings – and there’s a perception that shareholders aren’t taking this seriously, although in fact our experience is that investors are really getting hold of this now.
“There’s a huge move among the people within the investor community who run the sustainability funds, as well as those who run the mainstream funds, to focus on this and ask the difficult questions. They want to know if your Board has really assessed the climate risk in your business model. Within 12 months it will be mainstream – they are very vocal.”
Karina agreed, referring to BlackRock which, three years ago, told its fund managers it was important to take climate change into account whether or not they believe in it because of pervading public opinion.
“They may not believe it but the client cares, the customer cares – we are at a crossroads and I do think the investment sector is going to change.”
Julie stressed that NEDs should focus on seeing climate change from a commercial perspective and anticipate the new prospects that could be unlocked. “This isn’t all about risk; this is about opportunity, innovation and growth through good practice. A strategy for 1.5 degrees may look at risk but it’s all about opportunity,” she said
, Global Head of Actelion Pharmaceuticals and NED with Johnson Matthey, agreed, adding that an activist mindset and passion is required to drive change and generate success that convinces the doubters.
“Build a coalition of the willing within the company which can then start to influence upwards. If you’re an exec and you’ve got that coalition, some good things can happen because you’re not trying to drag someone to do something.
“If you worry about climate change in your personal life, you should worry about it at work. You’re not a different person when you get into the boardroom.”
Next week’s Community Update will look at the leadership issues surrounding risk management during uncertainty.