Director Reference Guide: Climate Governance

How much do you and your board know about climate change? How often do you discuss the potential impacts on your organization? These are just two of the key questions he suggests boards ask themselves and each other.

In her book's chapter on climate change, she says: future managerJorgensen Bank cites growing pressure from investors and advocacy groups as one of the many reasons climate issues are, or should be, now at the top of board agendas around the world. listed.

A competent board should be able to “understand the consequences of climate change, including how it will affect sourcing, production, and distribution, and how it will affect the behavior of investors, business partners, and customers.” “It would be foolish not to consider the many potential impacts,” she wrote. ”

“If we really want to move towards zero carbon dioxide, we need to think about a very concrete timeline.” —Johan Rockström, Director of the Potsdam Institute for Climate Impact Research

Bank Jørgensen's ESG and governance credentials are solid. Her consultancy, Competent Boards, teaches her ESG skills to directors, and she is also a former member of the Nasdaq Center for Board Excellence, a member of the World Economic Forum's Corporate Governance Expert Network, and a member of the He is also a former member of the Prince of Wales. Expert Committee on Accounting for Sustainability.

“Boards are responsible for the long-term resilience of the company,” she wrote. “This includes adapting to major changes in the business environment due to climate change. For boards, the climate crisis is both a threat and an opportunity. Boards need to urgently consider how their companies will be affected, as this could change their companies for better or for worse.

Rewarding Resilience

But Bank Jorgensen believes that finding ways to combat climate change doesn't have to be an arduous and bureaucratic task. “With a little imagination, it can be fun and rewarding.”

Peter Schlosser, associate director of the Julie Ann Wrigley Global Sustainability Institute in Arizona, is also positive. These choices are not just sacrifices, as people commonly think. We know there are business opportunities. New industries could be built. Existing industries and companies have the opportunity to change their portfolios. ”

future manager Here are some guidelines for boards on this issue and a list of 10 questions that directors might ask themselves or use as the basis for board discussions. These are reproduced below with permission from Helle Bank Jørgensen.

Board guidelines

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

⇒ Familiarize yourself with the Task Force on Climate-related Financial Disclosures (TCFD) and its recommendations. Use the task force's work as a guide for internal discussions about scenarios, strategies, risks, and goals.

⇒ As TCFD reporting becomes mandatory or incorporated into accounting standards, be prepared to report on your company's progress in tackling climate change.

⇒ Ensure that management identifies the company's short- and long-term climate risks and opportunities and develops strategies to manage them.

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

⇒ Ensure corporate lobbying and advertising is aligned with climate change policy.

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

⇒ Identify activities that can move your company to net-zero operations.

⇒ Disclose as much information as possible about your company's climate policies and scenarios using the TCFD, the US SEC's 10-K Form, and similar regulatory filings from other countries.

⇒ Issue a statement signed by the CEO and board members confirming that everyone has read and discussed the IPCC 2021 report. The statement should explain whether and how the report prompted a change in strategic planning or priorities.

10 important questions

1. Do board members consider climate change risks and opportunities as an integral part of their responsibility for the long-term management of the company? Why? Who has the expertise to oversee climate change mitigation and adaptation strategies?

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

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

4. Has the company signed a science-based net-zero carbon commitment and developed a plan and budget to achieve those goals?

5. Does the company have any assets that could become stranded in the near future?
Are you working on downsizing those assets rather than selling them to a buyer that could further harm the environment?

6. How are you and your board informed about sound climate governance practices?

7. How does the board ensure that climate risks and opportunities are appropriately discussed with investors?

8. Is the board kept informed about the company's energy expenditures? Does management consider energy a controllable operating expense?

9. Are science-based climate goals built into management incentives?

10. Is the board's position on climate change consistent with the company's lobbying and marketing messages and industry association membership?

Excerpts and quotations from Future Stewards, A Guide for Effective Boards (Barlow Publishing) Reprinted with kind permission of Helle Bank Jørgensen, CEO and Founder of the Board of Directors. This book is available in hardcover and Kindle editions.