Systematize decision-making for climate risks
After analyzing the wide-ranging risks they face from climate change, companies need to integrate this understanding across internal decision-making structures, including all decision-making on public policy.
The Ceres Blueprint for Responsible Policy Engagement on Climate Change addresses decision-making at two levels. At the management level, the Blueprint calls on companies to establish cross-organizational teams to ensure that the policy positions being staked out by the company—either directly or through trade associations—are informed by the company’s risk exposure to the climate crisis and the impacts of unabated climate change. Such teams should include sustainability, government affairs, legal, financial, and risk management teams.
The Blueprint also calls on the board of directors to explicitly oversee climate change. Assigning formal oversight at the board committee level ensures that the company’s climate-related risks are systematically raised at the board level and considered within discussions on strategic planning and risk management. In addition, management should ensure that boards are kept informed on climate change risks, including the relevant policy context.
It is past time for corporations that champion a clean-energy vision to incorporate the work into their government relations departments to press for the bold, equitable climate policies that our future demands.
—BILL WEIHL, EXECUTIVE DIRECTOR, CLIMATEVOICE AND FORMER CORPORATE SUSTAINABILITY OFFICIAL AT GOOGLE AND FACEBOOK
Systematize By the numbers
88% (84 of the 96 companies assessed) formally charge their boards with the responsibility to oversee sustainability issues.
71% formally charge their boards with the responsibility to oversee sustainability
17% formally charge their boards with the responsibility to oversee climate change specifically
12% do not formally charge their boards with the responsibility to oversee ESG issues
The data on board involvement on climate change combined with the data on materiality (74% of large companies assessed acknowledge that climate change is a material risk) suggests that large companies are paying heed to the calls from investors and other stakeholders to treat the climate crisis as a corporate priority and address their climate risk exposures. The parallel existence of risk assessment and governance systems for climate change indicates that large companies are putting in place the right internal infrastructure to allow for risk-informed decisions on climate change writ large.
However, the data—and underlying corporate disclosures—largely does not address whether and how corporate leadership addresses climate change policy as a part of the broader climate risk landscape. Robust science-based climate policies serve to mitigate corporate climate risk exposure in the short, medium and long term and should be discussed at the board level through such a risk mitigation lens.
LEADING PRACTICE
Ford’s Sustainability and Innovation Board Committee oversees climate change, as well as the company’s lobbying efforts, allowing for integrated consideration of both issues. In fact, Ford’s Charter specifically tasks the committee to: “Discuss and advise management regarding the development of strategies, policies, and practices that assist the Company in addressing public sentiment and shaping policy in the areas of energy consumption, climate change, greenhouse gas and other criteria pollutant emissions, waste disposal, and water use.”
LEADING PRACTICE
Verizon has disclosed how each of its four board committees are engaged on climate change. For instance, the company noted that in 2019, the Audit Committee discussed operational and financial risks relating to energy management and the company's renewable energy and carbon neutral commitments, maintaining network reliability during catastrophic and weather-related events, and possible changes in carbon policy.
There is little to no consistent disclosure on how companies systematize decision-making on climate change lobbying at the management level—and therefore we could not include this issue in our dataset. Our analysis indicates that some companies do have cross functional committees and teams in place to coordinate on the company’s climate strategy writ large, but there remains limited disclosure on corporate systems and processes for ensuring that corporate decision-making on policy advocacy is informed by climate science.
LEADING PRACTICE
Coca-Cola’s cross functional team, which includes representatives from sustainability, legal, public affairs, procurement, geographical Operating Units, and others, meets monthly to discuss the company’s global climate strategy, climate policy and engagement activities, and stakeholder engagement. The team reviews all direct and indirect climate-related policy engagement activities to ensure they are supportive and consistent with the Company’s “climate protection strategy.”
ADVOCATE Indicator guidance
Indicators assess whether:
Provides insight into whether climate change is raised systematically and in depth at the board level, indicating that it is a priority at the oversight and leadership level.
Company receives credit if any of their board committee charters have specific references to "climate change", or proxy terms that can be construed to include climate change such as “environment” “CSR” or “sustainability.”
Meets Expectations
Does not meet expectations
Yes
Unclear
No
Not Applicable
| Company Sort descending | Ticker | Sector | The board has assigned formal oversight of climate change and/or sustainability to one or more standing committees |
|---|---|---|---|
| Honeywell International | HON | Industrials | |
| IBM | IBM | Technology | |
| Intel | INTC | Technology | |
| Johnson & Johnson | JNJ | Health Care | |
| JPMorgan Chase & Co. | JPM | Financials | |
| Kinder Morgan | KMI | Energy | |
| Kraft Heinz | KHC | Food and Beverages | |
| Lockheed Martin | LMT | Industrials | |
| Lowe's Companies | LOW | Retail | |
| Mastercard | MA | Technology |
