What we’ve learned from Sustainability Committee Chairs

In a landscape where businesses are increasingly focused on their external impacts and social purpose, Sustainability Committees and their chairs are in a good position to drive positive change in their businesses.

Through a series of discussions, we have heard from Sustainability Committee Chairs of their experiences in progressing their board’s climate plans in a role with minimal precedent and limited examples to follow.

Here are six areas we’ve explored and what we’ve learned:

1. The role of the Sustainability Committee

The Sustainability Committee is responsible for all aspects of a business’s climate strategy, and particularly for the detailed understanding that is needed to inform the decision-making of the whole board.

It is important from the start that the role of the committee is made clear, both for the benefit of the non-executive director (NED) members and the other board committees. The Terms of Reference must consider the broader committee matrix, governance structure and cross-committee engagement if the Sustainability Committee is to be effective. Crucially, the committee’s purpose must directly support and inform the company’s net zero commitments to ensure the appropriate level of ambition and achieve the necessary change.

2. Who is on the committee?

Sustainability Committee members do not have to be climate experts; non-executive directors are rarely chosen for their sustainability credentials. However, the shift in expectations means boards need to think about how their NEDs are building their knowledge in this area.

The committee members should be equipped and supported to drive the company’s net zero strategy by discussing and digesting detailed information that the board does not have time to go through. Committee members should ensure key findings are given the appropriate amount of attention from the whole board. The committee members will need the skills to make this happen, and a big part of this is having the ability to influence key decision makers.

Once the committee is established, the Nomination Committee’s plans should reflect what skills are needed to make the Sustainability Committee a success.Shape

3. Working with internal stakeholders

Actively working with other committee chairs improves the effectiveness of the Sustainability Committee; an example of this is the decision-making process around remuneration. Though implementing climate targets into remuneration metrics is still new to many businesses, collaboration with the Remuneration Committee is necessary to link incentives to the company’s climate transition strategy.

To prevent a disconnect between the Sustainability Committee and the activities of other committees, some boards have found it useful to make meetings non-exclusive and encouraged directors to attend regardless of committee membership. In some cases, the committee is wholly composed of representatives from the other committees.

Collaboration with employees is equally important as they are key to establishing what ambitions and targets might mean in reality for the organisation. Regular meetings with the board’s designated employee representative, as well as the active participation of committee members in employee forums, are two approaches to ensure the employee voice is integrated into climate plans.

4. Incorporating committee decisions into the business strategy

The committee is there to ensure that the business strategy is fully aligned with climate ambitions and that this translates into a meaningful plan which can be implemented.

While this may be about bringing recommendations to the board based on committee research and insights, some committee chairs have experienced resistance from other board members. Making the success of net zero commitments a whole board responsibility can help.

Making sure the work of the committee is well-grounded in insights, evidence and expertise also helps. Some committee chairs have valued meeting with members of the executive team responsible for implementing the strategy, to gain a better understanding of what they should be asking or challenging the board about. Most have found that bringing in external advisers or experts to raise questions or share new thinking can fundamentally impact strategic decisions and ensure both the committee and board are well-informed.

5. The committee and shareholder relations

A core component in the ongoing delivery of the company’s net zero ambition is the board’s relationship with shareholders. The Sustainability Committee is well placed to create a dialogue with investors and respond to their increasingly informed questioning.

To improve transparency, some committee chairs run annual roadshows with shareholders. With the support of the investor relations team, they use these to explain how the strategy is being governed, including why certain targets in the annual report have been set and the level of engagement with the strategy across the organisation.

Others have hosted panels at ESG days to focus on areas such as TCFD or how they are working with other committees on target implementation. Some committee chairs have found this experience of talking openly about unforeseen challenges to be more effective in building effective relationships with shareholders than overwhelming them with data. For example, when addressing the difficulties arising from the verification of Scope 3 emissions.

6. Do you need a committee?

Ultimately, the success of the strategy and committee depends on the extent to which sustainability is hardwired throughout the business. Given how critical climate change is, the risks and opportunities should be a whole board-level discussion.

In some organisations, there is no longer a requirement for a Sustainability Committee because the company’s climate plan is at the core of the business strategy and always top of the agenda. In these situations, integrating the committee’s governance structure into the board is part of the climate roadmap. But in most cases, the Sustainability Committee plays an important role in supporting the business to develop and act on its climate plans.