Companies around the world are increasingly alert to the climate emergency. They face calls from a growing range of stakeholders to take responsibility for the impact of their activities. Companies now have public climate strategies and targets, many of which include pledges that appear to significantly reduce, or even eliminate, their contributions to global warming. The rapid acceleration of corporate climate pledges, combined with the fragmentation of approaches, means that it is more difficult than ever to distinguish between real climate leadership and unsubstantiated greenwashing.
It´s not a secret that it can be risky to be transparent because public statements on SDGs and related measures very quickly come under scrutiny. But there are also many opportunities in disclosure. It is an intangible asset for companies. As stakeholders increasingly refer to ESG information when making decisions, there is a growing demand for this information to be accurate, consistent, comparable, relevant and trustworthy.
There is no question that these criteria apply when talking about financial data. The success and value of the company, the remuneration of the management, the demand of the market, the trust of investors, banks, customers and the society are linked to this data. There is a comprehensive governance system that defines the criteria and includes the rules for supervising, management and auditing. When it comes to non-financials there is no reason why the system should look different. Management is no longer responsible for only economic impact and risks. Managing a business means to be aware of economic, social and environmental risks to which a company is exposed. In terms of “double materiality”, the board of directors of a company must take into account not only the risks to the company (outside-in), but also the risks caused by the company to the environment, stakeholders and society as a whole (inside-out). The new responsibility is compounded by a general lack of regulatory oversight at international, national and sectoral levels. Identifying and promoting real climate leadership, and sorting it from greenwashing, is a key challenge.
Uncertainty is driven by actual circumstances and lots of open questions how to become green without missing the financial targets. But discussions to be green or successful should come to an end because we can’t afford to give up our planet and our responsibility for the next generations. To turn discussion into action we need to create a Green Governance. It is not just one system or solution, it is a combination of sufficient capabilities, data, technology, processes and structures. It starts with the tone from the top but also with capabilities and knowledge.
We need to build better boards depending on type and size of a company, publish a competency matrix that shows that there is no blind spot to make the best decision in a changing environment. It must be clear that financials and non-financials interact when reporting on the percentage of sustainable business. The management must be reliable to work on what they pledge for. The remuneration should include a pay for sustainability and it should be at risk if non-financial targets are not hit. Green Governance is not just a call to action it´s also necessary to be prepared for the audit trail on non-financials. Dealing with the requirements, chances and risks but also solutions will help us to effect positive change in the built and natural environments.
