Climate change–and the response that it demands from business–is the most galvanising and pressing issue of our time. Unlike other episodic challenges, we cannot expect it to diminish over time; we are already living a new normal whose features and demands will only sharpen and increase in intensity over time. Yet reflecting upon the tensions presented us by this existential challenge and clarifying the choices we are faced with, can help us make the right choices and execute the right leadership decisions.
Climate action in the executive suite
Climate action continues to evolve in executive suites and boardrooms around the world. Leadership discussions are taking on a new and more urgent tone, driven by the science, shifts in the marketplace and heightened stakeholder expectations. Anticipation of tighter and more exacting regulatory and reporting frameworks is sharpening leaders’ focus on the necessity and value of both immediate and longer-term action. Indeed, 90 percent of CEOs surveyed by Fortune and Deloitte agree on the urgent need to address climate change concerns.
Whatever the motivation–to manage risk, capitalise on opportunity or act upon conviction and align with the broadening sentiment for action–CEOs and the organisations they lead face a once in a generation moment to meet the climate challenge and do so with confidence. While Climate is not the sole ESG-related issue demanding attention on C-suite and Board agendas, it is certainly one of the most urgent and topical priorities in the minds of the CEOs and boards members with whom we speak. It is also the one that most keenly exercises their capacity to balance short and long-term decisions.
Five key tensions
In most instances, the impediment to action is not the intention. Instead, it’s the navigating of a set of choices and tensions which define an organisation’s stance on climate action and in many respects, its future position, prospects and prosperity. The core tensions we see CEOs, their executive teams and boards grappling with are:
Of course, the ways in which these tensions are being felt and experienced differs according to each organisation’s ambition, sector exposure and readiness to change. Some of the tensions are more routinely navigated by CEOs in the normal course of business, while others have a distinctly climate-oriented flavour.
To effectively navigate these at times daunting choices, CEOs need to create a holistic view of their climate and sustainability goals and integrate it within their overall enterprise purpose and strategy. The more a climate strategy complements and is reinforced by its corresponding corporate and business strategies, the more easily stakeholder dissonance can be reduced or eliminated, and the less distracted a CEO and leadership team will be. As guidance to navigating the tensions, we suggest CEOs and their executive leaders consider some key questions. Download a copy of our full report to find out more.
Perhaps no stakeholder is as important a partner to a CEO in navigating these choices and tensions, as is their Board of Directors. Boards are certainly under pressure to enhance their governance of, and disclosure regarding, climate risk, commitment and action. In the best of worlds, CEOs and their boards will develop a shared agenda on climate pledges and related actions. Doing so will require CEOs to consider their boards as partners on their climate action journey, as opposed to an additional stakeholder group to either be selectively listened to or managed. CEOs should actively seek input from their boards on the most consequential of the choices, as well as get help on weighing and reconciling differing stakeholder interests, so as to help the board to ultimately confirm direction with confidence.