The Climate Of Business #113: The importance of engaging board members in the net-zero journey

Climate Change Reality

• Air pollution is so bad in this Asian capital that flights are being diverted due to low visibility (Euronews)
• UK to miss tree planting target, trade body warns (BBC)
• Delays in cleaning up EU air will cause thousands more early deaths, say health experts (The Guardian)
• Urbanisation’s role in the climate crisis is being overlooked (Financial Times)
• Australia ‘on track’ with climate targets needed to protect Great Barrier Reef, Labor tells Unesco (The Guardian)

• ‘A new climate reality’: Spain’s drought-stricken villages have been in crisis mode for months (Euronews)
• Texas Is Already Running Out of Water (WIRED)
• Plastic bag bans in the US reduced plastic bag use by billions, study finds (World Economic Forum)
• ‘We’ll have to burn millions of trees after cuts' (BBC)
• Denmark leads the way in incentivising low-meat diets (Financial Times)

Business Climate Reality

• EU Policy: New market rules to promote repair over replacement (Euronews)
• Heat pumps needed at 'much faster rate' - watchdog (BBC)
• ‘Grossly irresponsible’: UK hands out 24 new North Sea oil and gas licences (The Guardian)
• Why 2024 is the year sustainability develops a credible business case (World Economic Forum)
• Biden halts permits for LNG projects under climate campaign pressure (Financial Times)

• Vets urged to cut pesticide flea treatments amid river pollution fears (The Guardian)
• Fast fashion helps fuel blazing kilns where workers faint from heat (BBC)
• EU Policy: Pharma and cosmetics industries to pay for wastewater treatment (Euronews)
• Data to decisions: How technology can solve a $1.2 trillion climate change problem (World Economic Forum)
• Too hot, too dry, too wet: climate change hits Italy’s winemakers hard (Financial Times)

Reality Check

Engaging board members on a company's net-zero journey is an essential and transformative approach, marking a significant shift in corporate sustainability. Engaging such critical stakeholders is a journey that challenges key decision makers to move beyond the traditional role of oversight, urging them to actively reimagine and embed sustainable practices into the very core of their business operations. 

Accordingly, this week's newsletter will dive into the importance of board buy-in for sustainability, how as a board member you can learn to speak to sustainability teams, how the relationship between boards and sustainability teams should be navigated, as well as the ways in which ROI on sustainability is to be communicated.  

Join our upcoming webinar: Mobilising the boardroom to lead on climate

Why is board buy-in such an important component of corporate sustainability?

Involving your board in your net-zero strategy is not just about corporate responsibility, it is about future-proofing your business. Effective board engagement ensures that sustainability is not an afterthought but a cornerstone of your strategic planning and decision-making processes. It also strategically future-proofs your organisation, equipping it to navigate uncertainty, capture market opportunities, attract investment, and foster a talented workforce. Sustainability, when championed at the board level, positions your company as a forward-thinking, responsible leader in a world where sustainability is not just a choice but a necessity for long-term success.

The board member perspective: How should boards engage with sustainability in a company?

Boards can engage with sustainability in a company by adopting a governance model suited to the company's context, focusing on strategic aspects, and ensuring sustainability is integrated into all aspects of corporate strategy. Here are key steps based on the search results:

1. Select a Governance Model: Boards should choose a governance model that suits the company's culture, industry dynamics, and sustainability maturity.

2. Focus on Strategic Aspects: Boards should prioritize strategic reflection on sustainability, stressing sustainable growth and new value creation[1].

3. Educate Directors: Continuous education on sustainability is crucial to develop a sustainable mindset among board members.

4. Establish Clear Metrics: Set goals and metrics for tracking progress towards sustainability targets, ensuring credibility and performance measurement.

5. Integrate Sustainability: Ensure sustainability is fully integrated into all aspects of corporate strategy, with the board engaged throughout the process.

6. Provide Context: Help board members deepen their understanding of emerging sustainability issues and their impacts on the business and broader systems.

7. Be Well Prepared: Lay the groundwork ahead of time, involve cross-functional teams, and structure presentations aligned with strategic priorities.

By following these steps, boards can effectively engage with sustainability in a company, driving long-term success and value creation while meeting stakeholder expectations.

The management perspective: Understanding how external stakeholders' perspectives influence the decisions made by corporate boards

Board are often concerned with industry relevant shifts by variety of stakeholders. Here are critical ones to consider when shaping your view on how to balance the relationship between board members and sustainability teams.

• Governments: Countries worldwide are setting ambitious targets to reach net zero emissions. The European Union, for example, is committed to becoming climate-neutral by 2050 and has set a target to reduce emissions by at least 55% by 2030 compared to 1990 levels.
• Shareholders: Globally, shareholders are increasingly focusing on the potential impact of climate change on financial performance. There’s a growing trend of using proxy voting power to influence corporate actions on climate change. Support for environmentally focused shareholder proposals is gaining momentum.
• Investors: 57% of investors said that companies meeting the Corporate Sustainability Reporting Directive (CSRD), U.S. Securities and Exchange Commission (SEC) climate disclosure and the International Sustainability Standards Board (ISSB) would meet their information requirement for decision-making. Additionally, 74% of investors said that companies’ management of sustainability-related risks and opportunities is an important factor in decision-making.
• Regulators: Regulatory bodies, including the U.S. SEC and the European Securities and Markets Authority (ESMA) in the EU, are emphasising the importance of climate-related disclosures in financial reporting.
• Corporate initiatives: In response to these pressures, companies globally are making net-zero commitments. However, the level of progress and planning toward achieving these goals varies significantly. Nearly two-thirds of companies have made public commitments to address carbon emissions reduction within their organisation, though only 12% rate their sustainability efforts as “extremely successful”.

Plan A’s latest whitepaper is specifically crafted to guide executive and leadership teams on how to engage their board on the net-zero journey. Download it here. 

A step-by-step overview of how to ensure positive board and management engagement on sustainability and decarbonisation

Emphasising a board-centric approach, the plan aligns with dual objectives: fulfilling environmental responsibilities and driving long-term business value. The focus here is on exploring effective leadership strategies for boards, ensuring a seamless integration of the net-zero transition into the broader strategic goals and operational practices of the company.

1. Present a strategic rationale for transitioning to net zero

2. Conduct in-depth associated risks of enhanced risk and opportunity analysis

3. Steer the board towards a dynamic decarbonisation strategy

4. Encourage boardled alignment of business strategy with decarbonisation goals

5. Drive board initiatives for climate integration in business functions

6. Facilitate board leadership for industry-wide sustainable practices

Accordingly, the critical role of board members in driving organisations towards a net-zero future is clear. Meanwhile, the way in which executives and leadership teams engage their board in doing so is also critical. From understanding the nuances of net-zero definitions and implementation strategies to acknowledging the diverse roles of stakeholders, sustainability leaders must account for the multifaceted and often complex nature of the journey.

Get in touch to learn more.

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