The World Economic Forum's Community of Chairpersons undertook a mission in late 2021 to gain insights on climate action from its distinguished members. This document summarises key highlights from interviews with 16 influential board members from different sectors and countries. The aim of this effort is to provide board members around the world with the knowledge and understanding they need to navigate the complex field of climate governance effectively. This paper delves into five key areas that require board members to pose relevant questions in order to steer their organisations towards a sustainable transformation.
Do you understand where your company stands in its climate governance journey and how you will need to evolve?
Chairpersons noted that many companies are still grappling with "how" and "why" to act on climate change, but that the number of companies struggling with the "why" question is declining. They stressed the importance for boards to keep up with global trends. Climate decisions can take a long time to make, but once they are made, implementation is key.
Boards need to decide whether to lead or follow quickly on climate action, and clarity is needed for alignment. Waiting for all the information before taking action is a challenge; waiting too long is risky.
Moving from a "sustainability strategy" to a "sustainable strategy" is essential, as is diversifying the backgrounds of boards to avoid short-sighted thinking. Boards need individuals who understand the pace of change and are willing to take risks.
How aware is your board of the risks and opportunities presented by climate change and climate action?
Many boards are still struggling to understand the risks of climate change, especially transitional risks such as regulations and investor pressures. It is crucial that boards treat climate risks in the same way as all other risks they deal with. In addition, boards need to be alert to opportunities that arise during crises and consider how to target new areas of growth.
Greenwashing, although declining, remains a significant risk. Some companies are making commitments without a clear plan to deliver them. To avoid the perception of greenwashing, it is essential that companies follow through on their commitments. Establishing consistent reporting standards and disclosure frameworks is the first step towards effectively managing risks and seizing opportunities.
Do you understand your stakeholder pressures and the trade-off decisions they face?
For most companies, negative publicity is the most important driving force for change. Sources of pressure vary by location and industry, but are increasingly common. Chairpersons can also put pressure on their stakeholders, such as governments and suppliers, to take proactive measures.
Board engagement with stakeholders such as investors and governments is essential to make informed decisions and achieve meaningful results. Such two-way communication helps decision-making and leads to effective results.
Does your board hold the right diversity of capabilities to competently engage on climate and act decisively?
In general, there is little awareness of what other companies are doing in terms of climate action and climate competence is often seen as optional. However, this varies widely by sector, location and ownership model. Chairpersons have a key role to play in educating their boards and expanding their networks in this regard.
How is climate risk and action embedded in your board operations and governance structure?
Cultural and climate action cannot be delegated, but requires the active involvement of the Board. In order to ensure that climate issues receive the attention they deserve, it is essential to establish a structure where they are regularly on the Board's agenda. This may include tactics such as Board learning sessions, the appointment of experts or the formation of sub-committees.
The relationship between the Chairperson and the CEO is crucial. Chairpersons help CEOs maintain perspective and a long-term vision, while supporting them in influencing the Board to act on climate issues.