Competent Boards is a Business Reporter client.
Businesses are facing unprecedented change and uncertainty. And boards of directors have the obligation, and the opportunity, to help senior management step up to address it.
Business Reporter: competent boards
Navigating today's business environment is akin to steering a ship through increasingly turbulent waters. Today's boards have more to focus on than well-defined business challenges, such as industry competition. They must also confront many emerging challenges, including the pressing demands of climate change, the impacts of geopolitical tensions, and transformative technologies.
As such, the nature of junta governance has expanded irreversibly. It is no longer just about profitability and shareholder value. Sustainability issues are becoming mainstream, hence the rise of ESG criteria. Global investment funds are increasingly committing to net-zero carbon targets, emphasizing the urgency for boards to act. As the front line of corporate governance working with management, boards have the obligation and the opportunity to do so.
Boards have a dual responsibility: they face mandatory reporting requirements and the need to take an integrated view of long-term value creation for multiple stakeholders. Driven by mandatory global and national requirements, risk reporting and scenario planning for climate and other sustainability issues (such as human capital and biodiversity) are becoming widespread around the world. Failure to comply could result in serious financial and reputational impacts.
Beyond compliance, boards also have a responsibility to step up their role to help their organizations adopt an integrated approach to long-term value creation, for example by promoting an efficient transition to alternative renewable resources and integrating ESG/sustainability in its purpose, governance. , strategy and business risk assessments. COP28 in Dubai, this year's edition of the United Nations' annual forum on climate change, revealed that while innovative transitions to cleaner energy sources are making progress, the private sector will need to accelerate its climate investments, as Public funds alone are inadequate to finance the shift to renewable energy and achieve net-zero emissions targets, especially in emerging markets.
Leading the way
As the front line of governance, boards must educate themselves on a wide range of interconnected issues, risks and opportunities, and lead by example. Green financing and environmental innovation are now at the center of all industries. Likewise, technological challenges in terms of cybersecurity and artificial intelligence have come to occupy a prominent place on the agenda. Even public health and well-being has been thrust into the spotlight due to the far-reaching impacts of the Covid-19 pandemic. This has forced a rethink of safety protocols and the very nature of work, as the pandemic has caused unprecedented supply chain disruptions and accelerated remote work trends.
While challenges manifest differently depending on geographic and cultural contexts, the essence remains the same: global corporate boards must proactively engage with an increasing range of social, environmental and governance issues.
The fundamental conclusion is universal: no matter where a company operates, remaining passive in the face of these vital issues is no longer an option. Boards need to know that their governance decisions resonate far beyond local or national borders. Given the interconnected nature of today's global business environment, a decision in one region can have far-reaching implications, affecting brand reputation, stakeholder relationships and global operational risk.
Therefore, boards around the world must prepare to address these multidimensional challenges, understanding that they are not isolated but part of a complex global tapestry. Ignoring this global interconnectedness risks not only local consequences, but could also place the company at a strategic disadvantage on the world stage.
Now is the time to act and win the race for relevance
Being decisive is not an option but a necessity. Boards that choose to ignore these changes do so at their own risk. In today's interconnected and fast-paced world, looking the other way is a strategy doomed to failure. Boards will be better served by proactively recognizing these emerging risks and opportunities. As Nik Gowing, former BBC news presenter and business consultant, likes to say, boards should even “think the unthinkable” in their business risk assessments and scenario planning when working with management. He is even more forceful in saying that “the conformity that gave them (board members and senior business leaders) their jobs” is no longer fit for purpose in this new world.
As the first line of governance, boards must commit to continuing education and skills development in an environment of unprecedented change, where speed and a sense of urgency are king. Increasingly, regulators are requiring companies to document the specific competencies of their individual board members on ESG and other matters. Survey after survey shows that boards lack ESG competency, including those conducted by Competent Boards on its thought leadership portal The Future Boardroom. We believe there is a need for a committed and cost-effective strategic partner to keep boards of directors educated and certified on what matters most to regulators, investors, customers, rating agencies and insurers.
The risks and opportunities are too high. Boards must act.
For more information please visit competentboards.com .
