Raising the board debate on climate change
The science is clear and the need for action is urgent. Our current trajectory will lead to temperature rises of 4°C; a truly catastrophic outcome for most of the world. The Intergovernmental Panel on Climate Control (IPCC) report, published in September 2018, gave us 12 years to take action to dramatically reduce emissions if we are to keep global warming to 1.5 °C. A year has now passed, and all the evidence suggests that, rather than reducing output, 2019 will be another record year. The more CO2 that goes into the atmosphere, the bigger, costlier and more disruptive the challenge of controlling temperature rise will be going forward.
As investor, consumer and media awareness and activism grows, defining the dimensions of change – both negative and positive – is essential for companies to be prepared. The sudden reduction in the use of single-use plastics, the advent of ‘flight shame’ and the advance of veganism are all indicative of the degree of changes to come.
Investor pressure is mounting in particular, as is the response of regulators such as the Bank of England with their requirement for stress testing for insurance companies and soon the banks. This will drive both shareholders and lenders to change their expectations of companies. The Green Bond movement is fast becoming mainstream for many sectors.
Only a radical change in personal habits and a coordinated and collaborative about turn of professional practices learned over a lifetime will enable a change from this trajectory. Change comes hard to most, but the degree of change required to alter this trajectory is unprecedented. We can all make a difference in our own pond and change can start from the actions of individuals – as we have seen so clearly from Greta Thunberg in Sweden – but collaboration and concerted efforts on all fronts, but particularly those fronts which lead from a position of authority, such as non-executive directors, are paramount.
The opportunities that arise as a result of this wholesale change in our environment are less talked about. Investment in innovation is helping not only better renewable generation, but significant operating efficiencies to reduce demand for energy. Vertical and artificial intelligence driven crop management are helping with food security. Truly innovative ways of capturing carbon from the air are being developed. The opportunity for companies to present themselves to their customers and employees as taking responsible climate action is there for the taking of the involved.
Chapter Zero was launched this summer; it is a network for chairs and non-executive directors of UK companies to encourage informed debate on the issue, and seems ever more timely. The initiative, one of a number of chapters established around the world under the auspices of the World Economic Forum, is led by a group of business leaders who recognise the threat climate change presents to companies in every sector, the opportunities it can present for forward thinking boards as mentioned above, and who recognise the role business can play in driving towards a net-zero carbon economy.
Article appeared in the Financial Times Board Director Programme newsletter, 5 November 2019