The US is facing a crisis of extinction, with a third of its biodiversity at grave risk of being wiped out. According to the data from NatureServe, 40% of animals and 34% of plants face imminent extinction, with California,Texas and other southeastern states having ecosystems at most risk.
This data is a stark reminder of the importance of placing climate change, biodiversity and nature-based solutions at the heart of companies’ strategic planning. They form just some of the huge range of environmental, social and governance (ESG) risks and opportunities that the modern business world must address.
To help your board directors and senior business leaders get best equipped to face these challenges, consider our world-class ESG and Climate & Biodiversity education programs. Here, you will get unparalleled insights from a global faculty of subject matter experts.
1. Future boardroom trends. A new series of reports by The Conference Board examines the key drivers that will shape American corporate boards over the coming years. Just over two-thirds (68%) of survey respondents believe that ESG will have a “significant and durable” impact, with more than half (53%) believing the same for stakeholder capitalism. The Conference Board has eight main recommendations to help companies and boards address risks and opportunities:
- Consider how the board can build ESG and stakeholder perspectives into existing processes
- Develop a framework for making business decisions that incorporates a multistakeholder focus and considers the company’s key ESG issues
- Prioritize general strategic business experience and industry knowledge — rather than specialized expertise — when enhancing the board’s composition
- Allocate ESG responsibilities thoughtfully
- Enhance (or maintain) board fluency in ESG and knowledge of stakeholders.
- Improve communications to the board, and the board’s engagement, on ESG topics and stakeholder views
- Ensure the board understands the breadth and depth of internal and external ESG-related communications
- Ensure the intensified focus on ESG and stakeholder capitalism is reflected in the board’s processes for evaluating the company’s, senior management’s, and the board’s own performance
The Conference Board ESG Center produced the reports together with Morrow Sodali and Weil, Gotshal & Manges, based on research featuring more than 240 executives from 137 companies.
2. Shell directors face unprecedented legal jeopardy. ClientEarth, an international group of lawyers and policy experts, has filed a lawsuit against the 11 board directors at oil giant Shell, claiming that its climate strategy is inadequate to meet climate targets. According to ClientEarth, this is the first case of its kind in the world that aims to hold a company’s directors personally liable for not getting their company ready for a net-zero transition. Only recently, Shell announced a record annual profit of US$40 billion. The case, brought under the UK Companies Act, is backed by institutional investors including UK pension funds Nest and London CIV, Sweden’s AP3, Denmark’s Danica Pension and AP Pension, as well as several asset managers.
3. Asset managers under scrutiny. The Financial Conduct Authority (FCA), which acts as regulator on financial markets and financial services firms in the UK, has issued a warning letter to asset managers. As part of its crackdown on greenwashing, the FCA says it will soon start testing the authenticity of the ESG and sustainability investing claims made in communications to investors. Poor governance is another FCA focus, which will be keeping close watch on firms around their handling of ESG and stewardship affairs. The FCA will shortly be publishing an official review of firms’ ESG oversight practices, which will establish new benchmarks for the future.
4. Multinational companies fall short on climate. Some of the world’s largest and richest companies are not following through on their climate-related promises. The Corporate Climate Responsibility Monitor 2023 says that many make “misleading” claims about emission-reduction plans, which makes them likely to miss net-zero targets. The report found the climate strategies of 15 of the 24 companies to be of low or very low integrity, as well as most of the companies’ strategies not representing best practices in climate leadership. According to the report data, the cumulative net-zero pledges of the 24 companies would cut their total greenhouse-gas emissions by 36% by their respective target years (2040 or 2050), compared with the minimum 90% emission reductions currently required.
5. ESG around the world. The research wing of The Economist has published its latest ESG ratings for Q3 2022 that look at how businesses, governments and society affect a country’s sustainability. Some of the key findings included:
- There are now five countries ranked A for environment: Croatia, Denmark, Estonia, Greece and Lithuania, which is a marked improvement on Q1 when there were none.
- Both Canada and the US continue to claim an A for Social and Governance, but only C for Environment due to ongoing large exports of oil and coal.
- In Asia, five countries (Australia, Japan, New Zealand, South Korea and Singapore) ranked A for Governance, with only Australia and New Zealand matching that for Social.
Mathew Loup is Competent Boards’ Director, Marketing & Communications. Follow Competent Boards on LinkedIn.Back To News & Views