Boards should be disclosing their governance of an organization’s climate risks and opportunities, as recommended by the Task Force on Climate-Related Financial Disclosures. Equally, they need to define management’s roles in assessing and managing climate-related risks and opportunities.
To do so will mean that boards need to gain enough experience in the topic, have access to adequate information about the financial impacts of climate change risks, and dedicate a standing agenda item in the boardroom to discuss climate risks and opportunities on an ongoing basis. At the end of the day, setting KPI’s to drive behavior is the change needed if organizations are going to future-proof their existence.
Boards are in a unique position to transform the pressure to act into incentives and strategies that empower management’s efforts to respond:
Boards can focus on actions that change behavior …
The EY survey found that CEOs focus on linking corporate purpose to global challenges. Boards, on the other hand, prioritize integrating actions into corporate strategy, internal governance and performance measures. In other words, they’ve focused on the actions that will use reward and recognition to incentivize behavior – and make the changes stick.
… but they need to step up
Transformational change is never easy. But what systemic factors do CEOs regard as the biggest constraint on them becoming more vocal and involved in helping to solve global challenges? The attitudes, skills, composition and leadership of their board. To support their organizations in becoming hotbeds of sustainable innovation, boards need the courage to change — and to show vulnerability by admitting they don’t have all the answers.