The National Association of Corporate Directors (NACD), host of the US Chapter of the Climate Governance Initiative, launched their Climate Advisory Council at an event during New York Climate Week 2023. The event brought together board directors from a diverse range of sectors and jurisdictions, to explore their approaches to tackling the climate challenge, seizing opportunities and assessing climate-related risks in their organisations.
The NACD’s Climate Advisory Council aims to advance climate governance in corporate boardrooms in the United States by providing insights, sharing best practices and increasing awareness of climate topics relevant to boards.
- Climate governance is a business imperative. Board directors should recognise that climate governance is not solely an environmental concern; it is a critical business imperative. The climate crisis will have a significant impact on an organisation's operations, reputation, and long-term value. Board directors must prioritise climate-related issues in boardroom discussions and integrate them into strategic planning.
- It is essential to assess climate materiality and be transparent and accountable for such issues. Directors should focus on transparency in reporting, understanding the materiality of climate risks and opportunities to their specific sectors, and ensure accountability within the organisation. This involves clear communication of climate-related actions, setting goals, and regularly assessing progress to mitigate risks and seize opportunities.
- Continuous climate education and improving expertise is important. Directors do not need to be climate experts, but they should be climate-literate and understand the opportunities and risks that climate change presents to their organisations. Bringing in subject matter experts, staying informed about sector-specific climate challenges, and fostering a culture of peer-to-peer learning within the boardroom is essential for effective climate governance.
“Over the next 50 years, climate inaction could cost the global economy $178 trillion. On the other side, meaningful action around climate could generate $43 trillion dollars to the global economy.” Kristen Sullivan
John Bremen, Innovation & Acceleration Officer, Willis Towers Watson (WTW) Chief Strategy, explored the concept of stewardship for climate and ESG and how it has become crucial for long-term business success. His key remarks include:
Fireside chat - The growing importance of effective climate governance
Managing Director; Global Leader – Executive Compensation & Board Advisory, WTW, and Governing Board member, Climate Governance Initiative
Senior Director of Content, NACD
Director, Climate Governance Initiative
"[Board directors,] learn as much as you can and understand the climate topic not just as compliance, but as a highly disruptive trend that will impact every aspect of your business." Lucy Nottingham
The next segment in the event was moderated by Shai Ganu with speakers Lucy Nottingham and Alexandra Bolton. They discussed the significance of climate action in the boardroom, including methods for boards to support climate initiatives and the importance of capacity building. Highlights for board directors from the discussion include:
- Board directors should prioritise education on climate issues. Whilst they need not be climate experts, understanding the business implications of climate issues is vital.
- There is no one-size-fits-all approach to climate governance. Although best practices exist, boards should adapt governance structures to their organisation's specific needs. The commonality lies in climate considerations, such as opportunities and risks, being integrated into business strategy, to ensure resilience and adaptability.
- Boards must recognise that climate compliance alone may not be enough to secure long-term success. Engaging in climate governance and seizing opportunities arising from the net zero transition will support an organisation’s long-term survival.
Board directors have a unique set of skills. They sit on multiple boards and bring perspectives from other remits. The grand challenges, including climate, are all about systems and board directors have that fantastic view that you do not get anywhere else.
Panel discussion - Leadership challenges and opportunities for taking climate action
Global Audit & Assurance Sustainability and Climate Services Leader, Deloitte Touche Tohmatsu Limited
ESG, digital transformation, and cybersecurity, Board Director, Sunrun; TrueBlue; NACD Climate Advisory Council
ESG, Audit committee financial expert, Board Director, Impax World Funds/Impax Ellevate Fund; Martin Engineering; Peckham Industries; NACD Climate Advisory Council
“A guiding principle is ensuring that ESG and climate are part of your overall business strategy. You should not be asking where is your ESG strategy or where is your business strategy; it should be one." Sonita Lontoh
In the final panel discussion, D'Anne Hurd and Sonita Lontoh, non-executive directors and members of NACD’s Climate Advisory Council, shared insights on various aspects of climate oversight and ESG integration in boardrooms. Kristen Sullivan moderated the discussion and shared Deloitte’s findings on climate financial impact. Key points for board directors include:
- Board directors should prioritise continuous learning about climate-related issues and their materiality to specific organisations. Whilst some organisations may require climate experts on the board, others can rely on advisory consultants to stay informed. Either way, ESG should be a boardroom conversation in large organisations and SMEs.
- Board directors should familiarise themselves with key frameworks, such as the Task Force on Climate-related Financial Disclosures (TCFD), the Sustainability Accounting Standards Board (SASB), and the Greenhouse Gas (GHG) protocols. These frameworks are catalysts for business transformation, not just compliance and disclosure exercises, but will support boards in navigating the complex world of climate governance.
- It is important that board directors have a clear oversight of the responsibilities and accountability for climate and ESG within board committees, including processes and controls necessary for high-quality disclosure. For example, the audit committee should grasp the disclosure cycle, while the compensation committee should ensure that climate-related metrics align with the organisation's infrastructure.
- Board directors should exercise due care and diligence in their roles, with a focus on avoiding greenwashing and ensuring transparency in reporting. Transparency, even when the organisation's ESG efforts are not perfect, fosters trust among investors and stakeholders. Businesses should communicate their progress to all stakeholders on ESG goals and future plans.
Anybody that is thinking about ESG only from a liability standpoint, is missing the point. ESG presents [business] opportunities which the company should grasp.
Watch the full event recording below: