Originally published in Board Agenda

What steps should boards be taking now on climate change governance? Expert insights and key questions for directors to ask.

How much do you and your board know about climate change? How often do you discuss its potential consequences on your organisation? These are just two of the essential questions that Helle Bank Jørgensen, CEO of Competent Boards, suggests that directors ask themselves and each other.

In a chapter on climate change in her book, Stewards of the Future, Bank Jørgensen cites mounting pressure from investors and advocacy groups as one of the many reasons that climate issues are now—or should be—front and centre on boardroom agendas around the world.

A competent board, she writes, “would be foolish not to be weighing the many potential impacts of climate change: how it will affect procurement, production, and distribution, and how it will influence the actions of investors, business partners, and customers.”

‘If you really want to move towards zero carbon, you need to think in very concrete timelines.’—Johan Rockström, director, Potsdam Institute for Climate Impact Research

Bank Jørgensen’s credentials in ESG and governance are solid. Her consultancy, Competent Boards, teaches ESG skills to directors, but she is also a former member of the Nasdaq Centre for Board Excellence, a member of the World Economic Forum’s expert network for corporate governance and a former member of the then Prince of Wales’ expert panel on accounting for sustainability.

“Corporate boards are accountable for the company’s long-term resilience,” she writes. “This includes adapting to the vast shift in the business landscape resulting from climate change. For boards, the climate crisis presents both threats and opportunities. Climate change will transform many, if not all, businesses—some for better, some for worse—and boards urgently need to consider how their companies will be affected.”

Rewarding resilience

But the search for ways to combat climate change does not have to be a grinding, bureaucratic exercise, Bank Jorgensen believes. “With a bit of imagination, it can be both enjoyable and rewarding.”

Peter Schlosser, vice-president of Arizona’s Julie Ann Wrigley Global Institute of Sustainability, is also positive: “This is not just doom and gloom, but we have a way to make different choices from the ones that got us into this trouble. These choices are not, as people typically think, only sacrifices. We know there are business opportunities. There are new industries that can be built. There are opportunities for existing industries and companies to change their portfolio.”

Stewards of the Future lists guidelines for boards on this issue, together with ten questions that directors might like to ask themselves or use as the basis for board discussion. With Helle Bank Jørgensen’s permission, we’ve reproduced these below:

Guidelines for boards

⇒ Acknowledge that climate change will have a far-reaching impact on your company’s operations and culture.

⇒ Familiarise yourself with the Task Force on Climate-related Financial Disclosure (TCFD) and its recommendations. Use the task force’s work as a guide for internal discussions on scenarios, strategies, risks, and targets.

⇒ Get ready to report your company’s progress in tackling climate change as TCFD reporting becomes mandatory or embedded into accounting standards.

⇒ Ensure that management has identified the company’s short- and long-term climate risks and opportunities and has drawn up strategies to manage them.

⇒ Accept carbon pricing as a reality, then see it as an opportunity for innovation rather than as a threat.

⇒ Ensure that the company’s lobbying activities and advertising are aligned with its climate policies.

⇒ Work with lenders, suppliers, employees, and customers to find ways of mitigating climate-change risks.

⇒ Identify activities that can transition the company towards net-zero operations.

⇒ Use the TCFD, the SEC’s 10-K form in the United States, and similar regulatory reports in other countries, to disclose as much information as possible on the company’s climate policies and scenarios.

⇒ Release a statement, signed by the CEO and board members, confirming that all have read and discussed the IPCC 2021 report. The statement should explain whether and how the report has prompted a change in strategic plans and priorities.

10 key questions

1. Do members of your board consider the risks and opportunities of climate change as an integral part of their accountability for the long-term stewardship of the company? How so? Which of you have the expertise to provide oversight on climate mitigation and adaptation strategies?

2. How does the company assess the financial, supply chain, and reputational risks of climate change?

3. How often does the board consider different scenarios to assess the potential consequences of climate change on the business, and the business’s impact on society?

4. Has the company signed onto science-based net-zero carbon commitments, and drawn up plans and budgets to achieve those goals?

5. Does the company have any assets that could be considered stranded in the foreseeable future?
Are you committed to winding down those assets rather than selling them to a buyer that might do even more harm to the environment?

6. How do you and your board remain informed about sound climate-governance practices?

7. How does your board ensure that climate risks and opportunities are being adequately discussed with investors?

8. Is the board kept informed about the company’s spending on energy? Does management consider energy a controllable operating expense?

9. Are science-based climate targets integrated into management incentives?

10. Is the board’s position on climate change aligned with the company’s lobbying and marketing messages, and its membership in trade associations?

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