Citing the impacts related to Hurricane Irma, a new report from Ceres suggests that corporate boards bring extreme weather events, climate change, and other sustainability issues to the forefront of their decision-making process in order to meet their fiduciary responsibilities.
The report, titled “Lead from the Top: Building Sustainability Competence on Corporate Boards,” addresses the legal responsibility among boards to act when environmental and social issues threaten business models and financial performance.
“Sustainability should be a primary matter for all board members, not just those with environmental or energy expertise and backgrounds,” Carol Browner, former EPA administrator and board member at Bunge, writes in the forward of the report. “Expanding board expertise on sustainability should be part of every company’s board strategy. Understanding the material risks and opportunities for the company is inherent in a director’s responsibility to ensuring long-term value creation and resilience.”
According to a news release, key characteristics that make up sustainability-competent boards identified in the report include:
- Integrates knowledge of material sustainability issues into the board nominating process to recruit directors that ask the right questions.
- Educates directors on material sustainability issues to allow for thoughtful deliberation and strategic decision-making at the board level.
- Engages with external stakeholders and experts on relevant sustainability issues.
In addition, key practices corporate directors should follow to ensure boards are sustainability-competent include:
- Incorporate material sustainability issues into qualifications for potential board candidates.
- Find directors that can make the connections between environmental and social issues and the business context.
- Recruit candidates representing a diversity of backgrounds and skills to improve decision-making.
- Integrate new directors with sustainability competence into current board deliberations, especially on strategy and risk.
- Require regular education on material sustainability issues for the whole board.
- Find regular opportunities for boards to engage stakeholders on environmental and social issues.
- Incorporate material sustainability issues into board-investor dialogues.
The report builds on a 2015 Ceres report titled “View from the Top: How Corporate Boards Can Engage on Sustainability Performance,” centered around a two-pronged approach for integrating sustainability into decision-making through board governance systems and board actions. The report also comes at a time where shareholders and investors are pressuring corporate boards towards sustainability competence as well as ExxonMobil’s decision earlier this year to appoint a climate scientist to its board.