The NACD Summit is a highly anticipated annual conference for corporate directors. This year's in-person event was held in Washington, DC, and offered four days of enriching programming, featuring notable keynote speakers. It also provided a unique opportunity for directors and leaders to engage in networking and peer-to-peer dialogue. In this article, we will explore the 5 key takeaways we gathered from this event.
5 Key Takeaways from the Summit
1. Boards must effectively manage reputational risk
Boards must be prepared to address greenwashing accusations and demonstrate a long-standing commitment to environmental issues. Establishing a dedicated committee focused on public safety risks is essential, as is a proactive approach to understanding the legal implications and addressing underlying problems. Effective management of reputational risk hinges on these actions. Companies must not only talk the talk but also walk the walk when it comes to sustainability.
2. Boards are taking a more proactive role in addressing climate's impact
Boards and management must adapt to a significant shift in their roles and responsibilities. The shift is moving from merely preparing CEOs for board meetings to board members proactively inquiring about climate's impact on core business strategy, talent acquisition, and regulatory compliance. Mandatory disclosures, including Scopes 1 and 2, and in some instances, Scope 3, are becoming a reality, driven by regulatory bodies like the SEC and the state of California. Ambitious claims are under increased scrutiny, with fines and lawsuits becoming more common. Assurance and audit processes are of utmost importance, with the Audit Committee bearing responsibility for disclosures and controls. The board's role extends to ensuring that the information provided is genuinely decision-useful for shaping strategy, managing risks, and optimizing operations.
3. Climate should be integrated into your business strategy
Climate considerations should no longer be relegated to the periphery of business strategy. Instead, they should be seamlessly integrated into every aspect of a company's operations. The shift is away from discussing climate and Environmental, Social, and Governance (ESG) issues as isolated topics, with a focus on framing them as core business concerns. An example of this approach can be seen in Duke Energy's climate strategy, where they’ve effectively integrated climate considerations while maintaining their core business values, a benchmark for other companies to follow.
4. The focus has now shifted to practical implementation and data integrity
The focus is shifting from debating the necessity of ESG considerations to the practicality of their implementation. Improving data quality is critical to ensure that climate data is suitable for sharing with the board and shareholders. Additionally, tying leader compensations and incentives to sustainability targets can drive commitment. Rather than forming dedicated committees, many organizations are dividing responsibilities for efficiency. However, the challenge remains: reporting consistent, transparent, and traceable climate data. With sustainability reporting now being subject to the same level of rigor as financial reporting, addressing the materiality of climate issues is becoming increasingly important, even for companies not directly impacted by regulatory requirements, as they play integral roles in broader supply chains.
5. There is an urgent need for reliable greenhouse gas (GHG) data
The pressing need for reliable GHG data cannot be overstated. Companies must prioritize building the capacity to collect, calculate, and report their GHG emissions data accurately. As the transition from voluntary reporting to regulation continues, GHG data will be subject to the same scrutiny as financial data, requiring financial and legal internal reviews, as well as third-party assurance. Companies, therefore, need to be not only diligent in their reporting but also transparent about their methodologies and calculations.
The NACD Summit 2023 highlighted the pressing imperatives for businesses today. Navigating the evolving climate landscape requires a holistic approach that integrates climate considerations into the core of a company's operations and strategy. Reliability and transparency in GHG data reporting, as well as adapting to evolving board responsibilities, are vital for success. By managing risks, protecting reputation, and embracing change, businesses can thrive in a world where climate action is central to sustainability and competitiveness.