- Report shows potential competency gap as combined climate change knowledge and board-relevant business experience not widely present
- 50% of all board members expressed concerns with the level of reporting they receive on climate change progress
- 75% of boards believe climate change is important to companies' success, yet few board governance measures link executive performance to climate change goals
The survey revealed signs of continued progress in corporate commitment to climate change. 75% of boards believe climate change is very, or entirely important, to the strategic success of their companies, with 72% reporting confidence that their company will reach its climate change goals.
The more concerning findings centered on competency, knowledge and implementation.
- 50% of all board members expressed concerns with the level of reporting they receive on climate change progress.
- 69% said climate change knowledge is not a formal requirement for joining their board, and climate change knowledge is not included in their board's competency matrix.
- 65% said that knowledge of climate change is not a formal requirement in CEO selection.
- 74% of boards do not prioritize climate change in executive performance metrics.
The data also revealed a talent paradox: the best leaders on climate change often do not have board experience, and those with skills to navigate board dynamics often lack true understanding of climate change.
"As companies continue to evolve their ESG efforts – marked by real shifts in priorities in this pandemic era – boards whose primary focus is enforcing good corporate governance must lead on climate change. Regulatory and other pressures are converging to influence access to capital, as insurers, investors and lenders are increasingly requiring ESG disclosure that mirrors financial reporting to secure funding," said Louis Besland, Partner in
Most companies have implemented the basic tenets of good corporate governance related to climate change. Over 80% of companies have someone that is responsible for reporting on climate change to the board. But the scope of emissions targets are limited: only 16% reported their companies have targets for carbon emissions beyond their control (including their suppliers' and end users' emissions).
"The notion of what constitutes effective climate change governance is evolving as global dynamics, stakeholders and activists' pressure take hold. It is increasingly a top focus – from investors for whom climate is a priority in their financial-backing of organizations, to boards of directors scrutinized to integrate climate transition as part of the strategy; and from increased societal scrutiny around greenwashing with clearer metrics available on impact and results that count," said
The report from
- Consider adding more climate change voices with relevant expertise to the boardroom.
- Create board chair accountability on the processes and dynamics that support advancing climate change as, increasingly, companies that lack the ability to prove ESG metrics or meet stated goals may find they have limited access to capital in the future.
- Anchor climate change strategy in social and organizational purpose, and connect it to specific operations.
- Integrate climate change objectives into executive compensation and search strategies, especially for the CEO.
- Build climate-related disclosures with the same rigor required of financial disclosures.
About the Report
The survey was conducted during September and
About
About
As one of the world's leading and largest graduate business schools,
With locations in
About INSEAD Corporate Governance Centre
The INSEAD Corporate Governance Centre (ICGC) has been actively engaged in making a distinctive contribution to the knowledge and practice of corporate governance globally. Our vision is to be the leading center for research, innovation, and impact in the field of corporate governance. Through its educational portfolio and advocacy, the ICGC seeks to build greater trust within the public and stakeholder communities, so that businesses are a strong force for improvement, not only of economic markets but also for the global societal environment. www.insead.edu/centres/corporate-governance
Media Contacts
mwood@heidrick.com
M Booth
johnm@mbooth.com
Aileen.huang@insead.edu
Cheryl.ng@insead.edu
SOURCE