Having an engaged board and executive team is crucial to successful corporate decarbonisation. Engaging your board is not always a straightforward or linear process, and approaches will need to be tailored to your organisation. However, this guide offers a step-by-step approach to help you think about engaging your leadership on decarbonisation.
For more information on what an engaged board can do for organisation's decarbonisation mission, see 'Why Should I Engage my Board and Executive Team on Decarbonisation?'
1. Approaching leadership
Knowing where to start can be daunting, especially in larger organisations where you may not have regular contact with company leadership. One strategy would be gaining sponsorship from a C-suite champion who can drive decarbonisation from the top. This champion can then propose board-level training to increase awareness and activate other C-suite champions. This could involve a presentation from your sustainability team on the current state of your organisation's emissions and the benefits of reducing them.
2. Convincing leadership of the return on investment
It is not always a given that sustainability is a central pillar of high-level decision-making. As such, you may have to convince leadership of the importance of corporate decarbonisation and, more generally, sustainability.
Highlight your business-specific climate risks
A key approach to this is measuring and identifying your organisation’s emission hotspots, assessing climate-related risks and opportunities for your organisation, benchmarking against peers and industry leaders and emphasising the need for alignment with stakeholder expectations as well as the moral imperative of climate action.
Highlight the returns on investment in decarbonisation
Decarbonising your organisation undoubtedly requires significant financial and human resources, so how do you convince your leadership that a portion of your organisation's finite resources should be allocated to decarbonisation? Emphasising the return on investment here is crucial. Research shows that acting on corporate sustainability correlates positively with long-term financial performance. As such, sustainability should be a fundamental priority to any business seeking to gain a competitive advantage and the associated strategic financial benefits.
Decarbonisation can help your organisation to:
Improve access to capital
Improve access to capital
Around 85% of Chief Investment Officers state that ESG is an essential factor in their investment decisions, and they often prefer to invest in companies with robust sustainability practices. As such, companies that aim to bolster their sustainability efforts continuously will attract a broader range of investors and access capital more efficiently.
Improve resource efficiency
Improve resource efficiency
Businesses that identify and implement measures to enhance operational efficiency, minimise energy consumption, and reduce waste generation can maximise their profits via substantial cost savings such as lower energy bills, reduced raw material usage, and optimised supply chain operations. This approach helps companies tackle rising operating expenses, such as the actual costs of water or carbon. Accordingly, research by McKinsey highlights a 60% potential improvement in operating profits via the reduction of resource costs.
Enhance brand reputation
Enhance brand reputation
By demonstrating a commitment to social and environmental issues, businesses can differentiate themselves and build stronger connections with customers who value responsible practices. Evidence suggests that sustainability is integral to brand perception. For instance, a recent report revealed that brands focused on decarbonisation attribute 23.4% of their brand value to their reputation for sustainability. In fact, over half (54%) of consumers say they would stop buying from a company if they were found to have been misleading in their sustainability claims.
Ensure regulatory compliance
Ensure regulatory compliance
Organisations that take a proactive approach to meeting regulatory standards will be able to mitigate the immense financial and reputational risk of non-compliance penalties and legal issues related to ESG regulations. For example, companies that fail to report and comply with the Corporate Sustainability Reporting Directive (CSRD)—mandating EU companies to report on their sustainability—face fines of up to €10 million or 5% of their annual revenue. Regulatory compliance is fundamental to any business looking to gain a competitive advantage.
Engage employees
Engage employees
Given the increased value that employees place upon sustainability, ensuring sustainability is a strategic focus enables companies to reap the significant financial benefits of improved employee productivity, retention, and engagement. Businesses that implemented a sustainability strategy achieved a 16% increase in employee productivity and reduced turnover due to higher engagement. Moreover, companies with highly engaged employees achieve revenue growth rates 2.3 times higher than those with low engagement.
Decrease carbon costs
Decrease carbon costs
Businesses that do not take action to track and reduce their carbon emissions will ultimately see an increase in external costs. Whilst emissions trading systems (ETS) place a hefty price on CO2 emissions, carbon taxes in the EU have risen 488.57% from $16.36 per metric ton in 2018 to more than $96.29 in 2023.
4. Defining desired outcomes
Having an engaged board should lead to measurable outcomes. Without actions, verbal commitments to decarbonisation become little more than lip service. Deciding which outcomes are appropriate for your organisation, however, depends on your decarbonisation goals and how you want to approach the journey. Some example outcomes, however, include:
An internal commitment to sustainability
Approval and external publication of decarbonisation targets
Allocation of a dedicated decarbonisation budget and resources
Inclusion of decarbonisation KPIs in executive objectives performance reviews
5. Ensuring continued engagement
Decarbonisation is an iterative process, and your action plan will continuously need to be reviewed and adjusted accordingly. As such, sustainability needs to be embedded in your organisation’s long-term vision, and your board needs to be continuously engaged. There are several ways you can ensure your board stays engaged in decarbonisation.
One way to lock in executive leadership engagement with decarbonisation is through setting up a decarbonisation steering committee with executive representation. This could involve sustainability team representatives, executive leadership, and other key stakeholders within your organisation. Having such a group that meets quarterly, for instance, ensures that a direct channel exists for engaging leadership in regular reviews of decarbonisation progress, and allows for indications of where extra resources may be required as necessary. This will further empower c-suite champions to take the decarbonisation topic to the rest of the executive team and board.
Whilst these sessions should take place at a regular cadence, quick wins and successes should also be celebrated to provide visibility on progress whilst maintaining momentum and enthusiasm for the initiative.
By taking a structured approach, leveraging data and business arguments, and securing leadership buy-in, your sustainability team can drive meaningful progress towards decarbonisation. Maintaining continuous engagement and adapting to evolving circumstances will be key to sustaining the company's decarbonisation journey.