Climate Related Risk: Board Responsibility or Not?

☰ Sections

Climate Related Risk: Board Responsibility or Not?

Climate Change is a significant and imminent challenge that faces us all, as recognised by the Paris Agreement, the recently formed IPCC[1] and indeed today the WMO’s Statement on the State of Global Climate for 2018[2], all of which recognise that the previous 20 years have been the warmest in history. It is now necessary that businesses in all sectors to tackle their contribution to global warming. Boards need to identify the risks associated with their businesses and business model to mitigate these and also to lead their companies in taking advantage of the significant opportunities climate change represents.

On Thursday 7th of February Christine de Largy, Chair of Harvey Nash Board Services,  in partnership with Caroline Hayward of the Chairman’s Network hosted a discussion for board members and Chairs focussed the need for boards across the globe to focus on climate related risks and opportunities. A topic raised by our annual Board Research Report, which found that 56% of respondents had spent less than 1 hour discussing climate change in the board room over the last year.[3]

Three significant development for boards arose from the discussion;

  1. Product development presents significant opportunity for businesses when it comes to sustainability. Businesses and boards are inherently creative, and it is time for us to harness that ingenuity to produce more sustainable products and more sustainable means of production. This could provide a considerable opportunity for cost reduction as well as sustainability. We have seen creative examples in the use of ‘waste’ heat from datacentres, transformations in cleaning services and the use of unstorable energy in Lanzarote. It is time for business and their people to truly harness their intrinsic creative ability.

 

  1. In conjunction with the large-scale product changes business can drive more individual and day to day changes by encouraging a sustainable culture throughout the organisation. This begins in the boardroom with strong moral leadership; setting sustainable development goals and following sustainable principles. But it also comes through a desire to seek contributions from the workforce, who are well placed to drive out inefficiencies and are increasingly demanding of sustainable practices in the workplace. Left to an autonomous workforce innovative, small-scale changes can have a considerable effect upon a company’s sustainability

 

  1. Climate Change poses a substantial reputational threat and opportunity to businesses in all sectors. The reputational threat is obvious, as recently seen with plastic straws and in effects of fashion supply chains on water sources. A company with a poor or non-existent sustainability policy should be wary of the implications especially when social media is involved. Conversely there are significant reputation gains to be found when proudly promoting and abiding by a sustainable policy. As such boards should use to necessity of transformation in the face of climate enhance to their reputational advance, enhancing their brand while also protecting their business for the future.

 

We are now at the forefront of change, it is the time that businesses, individuals and governments to act on climate change if we are to halt the ever increasing global temperatures[4]. It is a truly global and complex issue and can appear far too big for one person or even one company to act upon. But there is a desire to start with the things we can control in our products, our supply chains, our packaging and our daily way of working. These incremental changes that stem from the boardroom will have a significant effect over the coming years, leading to more sustainable and profitable companies that will last the test of climate change.

 

[1] Intergovernmental Panel on Climate Change

[2] Provisional Statement on the State of the Global Climate in 2018, WMO, 2018, p.1

[3] The Uncomfortable Board Room: The New Normal, Harvey Nash/Alumni Board Report 2018/2019, p.15

[4] Climate Change: Calibrating the Thermometer, Schroders, 2017, p.1