Changing the Climate in the Boardroom
Research Study by INSEAD and Heidrick & Struggles
This is the time of the year when all of us must take a pause and reminisce about our achievements over the year gone by, also dwell on where we could have done better and gear up for the year ahead. One of the key issues that will continue to grab attention in the boardroom discussions and other forums, in one form or the other, will be climate change. In the last edition of 2021, the setting section of our newsletter brings an insightful study on how Boards are responding to the challenges posed by climate change, jointly conducted by INSEAD and Heidrick & Struggles. The broad objective of the study was to assess how boards are responding to the call for decarbonization.
Climate change is on the agenda for most of the boards and 75% of them think that “climate change is very or entirely important to the strategic success of their companies”. Most of them also think that they well aligned with the issue and the companies will be able to achieve their climate change goals. These are optimistic developments but at the same time around half of the board members are not satisfied with the companies reporting to them on addressing climate change issues. Similarly, 85% respondents feel that their boards need to increase its climate knowledge. However, the main reason to worry is that still more than two-third respondents do not prioritize knowledge on climate change. There are similar other findings which shows that there is still wide scope to improve the integration of climate change issue in the boardroom discussions.
The authors feel that the board members are “overwhelmed by the scale and complexity of their environmental, social, and governance (ESG) responsibilities”. They feel that the boards are caught in a vicious circle where those who understand the issue of climate change may not have enough business experience and those who are seasoned business players may not have sufficient knowledge on long term business implications of climate change. The study has listed the following recommendations to break this vicious circle and fill the knowledge gap:
- Include climate change in the board’s competency matrix and make sure the whole board has enough knowledge.
- Add more relevant voices to your boardroom.
- Change the board processes and dynamics— a responsibility for the chair.
- Anchor your 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.
We duly acknowledge the authors and INSEAD and Heidrick & Struggles for their study. The note has been developed based on the study with the same title.
