How to Improve Your Board of Directors’ Corporate Sustainability I.Q.

June 23, 2017

Explaining the benefits of investing in sustainabilityCompany “annual meeting season” is the perfect time for organizations to evaluate how well corporate sustainability is being addressed... or how much more attention is required. Most corporations recognize that ignoring renewable energy goals is not an option. But many others still may not know what they don’t know.

A recent article published by GreenBiz suggests it is up to a well-informed board of directors to not only take advantage of the benefits of corporate responsibility, but to also avoid the potential financial (and environmental) problems that can arise from doing nothing.

From the article:

“Boards have a legal fiduciary duty to shareholders to manage risk in the operations of the corporation they oversee. To manage that risk, they must understand it. So having a board competent enough to understand the various opportunities and risks associated with climate change is key.” 

The article offers three strategies organizations can adopt to help their board of directors be more prepared to understand the range of climate change risks and possible opportunities. These suggestions include:

1.    Appoint a climate scientist or similar expert.

Such an individual could help educate the board on a variety of potential climate change risks, including costs associated with responding to consumer and regulatory pressures to address issues like greenhouse gas (GHG) emissions. They can also highlight the potential expenses exacerbated by not taking action. While adding such an expert to the team seems like a logical step, it might not be enough. 

Also from the article:

“But if that director is not vocal or charismatic enough to persuade other alpha personalities, one appointee might not move the needle...”

Boards are also notoriously slow to turnover with new members. A better path to greater engagement could be involving more people.

2.    Assign responsibility to a committee.

While this also seems like an appropriate step for many companies, the article once again warns that there could be unseen drawbacks. If the task goes to an audit committee, for example, the risk evaluation will likely be inadequate. Audit committees typically review disclosures drawn up by lawyers who take a defensive approach (i.e.—they focus on identifying what they don’t have to disclose). A lot can be missed.

A better choice may be to empower a strategic planning committee. Such a group will be better focused on how sustainable business innovation impacts various levels of a company’s operations.

3.    Educate the entire board.

The article suggests detailed analysis be done and presented to directors in the financial language they are accustomed to reviewing. Such reports can help them better understand how investing in sustainability helps business as well as the environment. It can also illustrate how ignoring risk is irresponsible—and potentially costly.

Appoint, assign, or educate—or do all three! The path to better-informed corporate leadership can lead organizations to “walk the walk” as well as “talk the talk” when it comes to avoiding risk, and enjoying the benefits of investing in sustainability.


Related links:

How Business Is Defining the Future of Clean Energy

Learn How Sustainable Business Practices Can Benefit Your Organization

Ranking Support for Corporate Renewable Energy State-by-State

Sustainable Business Practices and Your Bottom Line

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