In May 2019, MPs approved a motion to declare an environment and climate emergency. In November 2019, the European Parliament approved a resolution declaring a climate and environmental emergency in Europe and globally. The statement came a few days before the opening of the UN COP25 Climate Change Conference in Madrid.
Climate change represents a risk to all businesses and their operating models. Climate change is already disrupting businesses. For example, extreme weather events leading to flooding, strong winds and rising sea levels have increased in frequency. At the same time, actions that aim at limiting global warming and reducing emissions can also disrupt businesses.
Stakeholders are increasingly challenging companies to take responsibility by taking clear, concrete and measurable actions to address climate change. It is expected that ESG and sustainability considerations are on boards’ agenda and stakeholders will increasingly hold management and boards to account to ensure that the environmental impact of their decisions is part of decision-making.
As a NED and board member, you play a critical role in addressing climate change within your company:
- You have the duty of ensuring the long-term success of your company that you oversee. NEDs and board members are responsible to their stakeholders to effectively manage climate-related impact of the business operations.
- You need to incorporate environmental considerations into the governance structure, ensuring that there is oversight at board and executive levels.
- You should assess the risks and opportunities related to climate change. The strategy and business planning need to incorporate environmental considerations and various climate scenarios. Businesses that are not forward-looking and fail to incorporate ESG into their decisions will be left behind, while having to adapt anyway as policies and regulations will catch up on investors, customers and the workforce, notably the younger employees that place high emphasis on sustainability. The sooner companies and their boards embrace ESG and climate change considerations, the higher their competitive advantage will be.
- Actions taken by companies should be reported and disclosed. If you do something good, say it and differentiate yourself.
Written by Elise Perraud, NEDonBoard COO
Boards and companies interested in finding out how NEDonBoard can support you in training your board of directors with regards to climate change, please contact [email protected]. You may also visit the Modern Board Member Masterclass page.