Last week, a CEO Daily roundtable was held with CEOs of corporations around the world to discuss their stance on climate commitments in light of today’s unprecedented economic uncertainty. CEOs from companies such as BCG, S&P, Ralph Lauren, and RBC responded with resounding support for climate action despite looming economic disruptions. The United States’ Inflation Reduction Act was cited as a large driver of climate investment due to the incentives built into the bill, with executives agreeing that the ball on the net-zero transition is already rolling as people and organisations fight to keep the momentum going.
The energy transition the world must undergo to address the climate crisis will be difficult and complicated. Competent Boards’ best-in-class ESG and Climate & Biodiversity can help create a toolkit for business leaders and board members so that they can put their company in the best position possible.
1. Lack of good governance led to the Silicon Valley Bank crash. Of the three pillars that make up ESG, governance tends to be overlooked for flashier social and environmental initiatives. Silicon Valley Bank (SVB) failed to manage its risk appropriately, and even spent months without a chief risk officer in 2022. Federal regulators informed SVB in 2020 that their risk management strategies were not sufficient for an organisation of its size, but the bank failed to address these issues. The lack of adequate risk management coupled with the rapid growth of the bank led to its implosion. Companies that overlook internal governance risk similar outcomes.
2. Importance of empowering diverse voices in corporate sustainability. After the murder of George Floyd in May 2020, corporations were forced to face the lack of diversity in their sustainability teams. Despite the fact that many pledges were made, efforts often fell short and failed to address the root causes of a lack of diversity. According to Lesford Duncan, CEO of the Greening Youth Foundation, building a pipeline from Black, Indigenous, and people of colour (BIPOC) communities to the environmental profession rather than filling positions with diversity hires is crucial to develop a strong pool of talent to hire from in the future. Companies must ensure their diversity, equity, and inclusion (DEI) policies are intersectional, and they must be willing to address uncomfortable topics such as inequitable practices in the workplace.
3. Significant disparity in perception of trust between business executives and consumers. PwC’s third annual Trust Survey contained a number of insights that outlined the importance of trust in corporate strategy. Over 90% of surveyed executives agreed that profitability was improved by a greater ability to maintain trust with consumers, while a loss of trust via data breaches or corporate scandals can cause significant long term damage to a brand. Strikingly, 84% of executives believed that consumers trusted their company highly while only 27% of consumers agreed. Companies must work to close this gap in order to reap the benefits of high consumer trust. Trust is also dynamic, as the top trust-related issues change year to year. In 2022, executives ranked supply chain issues as the top trust-related challenge, but in 2023 company culture took the top spot. Finally, half of customers and employees reported an event that damaged their trust in an organisation while only one in five executives felt their organisation had been involved in a trust-damaging event.
4. Addressing electronic waste. As our world rapidly digitalises, electronic waste continues to be a growing global problem. Electronics contain a range of toxic chemicals and metals, and without adequate waste management these toxins leach into soil and groundwater. The European Union, United States, and United Nations have each proposed guidelines for managing electronic waste disposal, but there are steps that corporations can take to mitigate the health and environmental impacts of electronic waste. These steps include being mindful and selective in their purchases and only buying electronic devices when absolutely necessary. According to Earth.org, companies that use large amounts of electronics in day to day operations should also have thorough waste management plans to ensure that electronics are sorted and waste is housed appropriately.
5. Chat GPT could replace millions of U.S. jobs. According to Goldman Sachs, almost 20% of jobs around the world could be replaced by AI. When asked directly how many jobs it could potentially replace, ChatGPT responded by saying that 4.8 million jobs in the United States could be replaced by Chat GPT. While the tool was originally intended to be used as an aid to employees in their roles and in day to day life, when Chat GPT was asked directly which industries it could enter with the most ease it responded with a number of computer science, artificial intelligence, and mathematical fields.
Ira Srivastava is Competent Boards Program Coordinator. Follow Competent Boards on LinkedIn.
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