High-impact threats such as climate change are moving up the agenda as board rooms reassess their priorities in light of the current pandemic, according to the World Economic Forum.
The influential body suggests that boards take six steps today to ensure that climate risk is given the attention it deserves in the coming months and years.
1. Start the conversation by adding climate change to the board agenda if it is not already an item. “True leadership is the act of stepping up before a crisis hits and putting plans in place to protect your business, your employees, and your position within the marketplace,” it said.
2. Know your ESG blind spots. It said that Climate risk management should begin with a broad and thorough ESG assessment to establish a baseline for the business’s existing ESG practices. Identifying blind spots and benchmarking are key tools for understanding how climate change risk could impact the bottom line.
3. Scenario plan. Businesses should use scenario planning to map out all potential paths forward — including the most dire possibilities. It said that organisations need to consider all possible scenarios — from changing product focus to innovating new ways of creating water.
“One silver lining to the COVID-19 pandemic may be that it has helped companies to improve their scenario planning,” the WEF said. “The rigour and methodology around scenario planning has improved and this discipline should now be applied to climate risk.”
4. Build your environmental reporting protocol. The body also advises boards to develop an ESG reporting system that aligns with their market’s ESG disclosure frameworks. “Transparency is key and disclosure requirements will only increase over time,” it said. “Understand your reporting responsibilities and take control of your ESG narrative now, as the reputational risk of not doing so is too great. Furthermore, there is a clear correlation between strong ESG performance and resilience in times of crises.”
5. Hold your organisation accountable. Linked to required public disclosures, your board should drive the organisation’s internal reporting around ESG, it said, despite the difficulty of quantifying some ESG risks. The company’s mitigating actions may not map to the risks in the same way as for other key risks.
6. Strengthen your bench. Hand-in-hand with knowing your blind spots, you must recognise any organisational gaps in ESG skills and experience. “CEOs need support to bring in the ESG expertise required, and it may be necessary to strengthen your bench at the board level as well,” the WEF said.
Separately, the Independent Committee on Climate Change announced that it is launching a new website to host independent research on UK climate change. www.ukclimaterisk.org will provide a digital home for some of the latest research on climate risk, and allow for wider engagement on the key issue of how the changing climate will affect our lives, it said.