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The environment in the boardroom: On overcoming obstacles

This podcast was recorded in August 2022, just after a record-breaking heatwave in the UK. Since the start of temperature recording in 1884, the ten warmest years in the UK have all been recorded since 2002. At the same time, rainfall is the lowest since records began, and hosepipe bans have been introduced in parts of the UK, while wildfires are raging across Europe. Climate change has become evident and continues to move up on agendas in board meetings. However, some Directors feel a greater sense of urgency than others.

In this podcast, Dr Sabine Dembkowski (Founder and Managing Partner of Better Boards) discusses the obstacles of making the environment an integral part of discussions in the boardroom and how to overcome them with Susan Hooper.

Susan is Chair of Tangle Teezer, Chair Designate of Inter. Earth, and sits on the Boards of Moonpig plc, EUROWAG plc, and Uber UK. She is Acting Chair of Carbon Gap, a Founding Director of Chapter Zero, and she is involved in several start-ups in carbon capture and sustainability. Susan is also an Ambassador for the World Travel & Tourism Council.

Some of the key takeaways of the conversation include:

“Climate change is time-boxed – we know the clock is ticking”

Susan points out that even as recently as 2018, climate change was usually not on the agenda or discussed in board meetings. It is now, but sadly, mainly because of external requirements. There is now a need to talk about it at board level (either due to regulation or investor action). If not, report on it or at least communicate what your plans are. She believes that one of the reasons for the previous lack of attention to climate change was the lack of understanding at board and chair level that this is not “just another crisis” but a situation without precedent that standard approaches will not resolve in the timeframe necessary.

She notes that some boards still show a lack of understanding of the impact of inactivity on the company’s longer-term value. As a result, there can be an inability to prioritise climate change against other challenges happening in parallel. But climate change has an increasingly hard deadline. We know the clock is ticking, and Susan points out that we have all seen the result of man’s impact on climate and how that is changing. This is not a crisis that we can continue to live with, to ignore, and it will go away. Nor can we deprioritize it to handle other crises that may not be here five years from now. She feels there is a real need to understand and embrace this issue without waiting to deal with it until 2030 or 2040.

“For every risk and issue that you are trying to solve, there is at least one opportunity that you hadn’t even dreamed was there”

Any problem can seem insurmountable but Susan says in these cases, you need to break it down into small manageable parts. The reality is that once this is done, people can understand the smaller issues. For example, emissions caused by the business are a huge issue. Still, the smaller issue of what kind of energy the business uses is manageable, for example, by changing energy suppliers for a renewable source, which is relatively straightforward. Susan finds that taking on some of the small issues making up the whole, it signals commitment and importance to the organisation, which can then create support within the organisation at all levels.

She says that when you start to do that, cost savings or efficiencies arise, and for every risk and issue that requires a solution, there is at least one opportunity that has not been noticed. She gives the example of Tangle Teezer, a company very committed to climate change and doing the right thing. They decided to change packaging they were perfectly happy with from non-recyclable acetate to cardboard, purely due to environmental concerns. The new packaging not only looks and feels better and is more modern, but it also achieves a 30% saving. This would not have been realised but for tackling one aspect of climate change. Opportunities can be created while looking at risks.

“Not everyone feels comfortable with the depth of change that is needed”

Susan feels that at the board level, there can currently be a feeling of overwhelm about change. Directors typically come to the board with decades of experience, knowing how to manage the circumstances prevalent in those decades. Still, the recent pace of change can place them in uncomfortable territory. She points out that not everyone feels comfortable with the depth of change needed to manage these changed circumstances. The desire to be competent is understandable, and organisations and boards are going into the unknown in many areas. It may not even be possible to be competent, and boards may have to learn by taking risks, making mistakes and adjusting – also by learning new skills and being aware that it is not a straight line to net zero, and there will be mistakes on the way. This needs to be incorporated and accommodated at all levels in an organisation. Boards cannot afford to be risk-averse, which is the natural tendency, and they cannot wait for risk-free clarity on this issue.

“You definitely don’t want to be the lone voice”

Susan explains that climate change is a topic where she can find herself the lone voice on a board. She feels board members have to be comfortable with not being “loved” nor appreciated, and they need working strategies around how to help bring the entire board to the level of understanding needed to have a good and healthy debate on this topic. Boards do not need to include climate specialists or scientists but boards must take facts and reality into account to have conversations and debate outcomes at the board level that will make a difference to the organisation’s long-term value.

“You’ve got just to keep chipping away at this issue”

Susan explains that Chapter Zero is an organisation to help get board members and Directors up to speed on the topic of climate change – from the topic itself, to regulation and reporting responsibilities. She also points out that this subject keeps changing, so the learning never stops. In the absence of climate specialists or climate competent people on the board, the rest of the board must inform themselves. She has found that bringing in outside advisors to speak, typically investors or banks talking about the economic value of getting this strategy right tends to make board members listen and acknowledge that tackling the issue is in line with expectations from the outside and the investor community. Susan describes Chapter Zero as a free receptacle of information and a network of Non-Executives seeking to answer the same questions. The information is curated, and a toolkit provides value to board Directors and Chairs. It has around 17 different chapters worldwide, although it is directed at UK board Directors and quite specific to UK regulations.

“This is an important issue that needs attention and to be embraced by the board”

Susan confides that she has made a personal pact with herself not to work for a company where the CEO and/or Chair is not recognising that this is an important issue that needs attention and to be embraced by the board. She believes that as a Non-Executive Director, you do sometimes need to make hard decisions, including stepping down and resigning from a board.

“We mustn’t expect everyone to become climate specialists”

Susan reminds us that board members are responsible for ensuring that climate competency is within the company in such a way that it will address the issues that need to be addressed. Being climate competent does not mean being a climate specialist, but knowing what topics are impactful or important for the company. She points out that there is insufficient time for everyone to become climate specialists, and those people who are will be in huge demand.

She feels there is an educational challenge in informing and ensuring boards, executives, and employees all understand what it means to be climate conscious in their environment.

In summary, Susan warns that the change is not needed by 2050. It is required in the next three to five years, or the targets for 2030 and 2040 are pipe dreams.

The three top takeaways from our conversation are:

  • Never underestimate the influence of a Non-Exec Director, despite being a lone voice. Each Director is responsible for the outcome of the company.
  • Everyone tries to make good decisions with the lowest risks, but waiting for clarity is not an option, as there is so little we understand.
  • Do not worry about what you cannot do. Just focus on what you can do.

 

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