07/12/2021

(AU SMH) Where To Start?: Boards Struggle With Climate Change Risks, Fail To Act

Sydney Morning HeraldPatrick Hatch

Many Australian boards are struggling to prepare their companies or organisations for climate change, with almost half the country’s directors saying they don’t know how to tackle the issue.

A first-of-its-kind study by the Australian Institute of Company Directors into how boards are approaching climate change reveals that 77 per cent of directors are concerned about how it will affect their organisation, but often failed to act.

Almost half of the directors surveyed said their boards should pay more attention to climate but did not know how to do so. Credit:Getty

“It’s not that people ignore the issue, it’s that they don’t know where to start,” said AICD managing director Angus Armour.

The AICD report is based on surveys of 2000 directors at ASX listed companies, smaller businesses, government organisations and not for profits.

Almost half of the directors surveyed said their boards should pay more attention to climate but did not know how to do so, while 28 per cent did not think their board had the knowledge or experience to adequately address climate governance issues.

Mr Armour said directors should be working to understand their organisation’s impact on climate, and how climate change will impact them.

Executive pay Banks are facing growing investor pressure over their exposure to climate risks.
“Then it’s contemplating both how you can improve your own position relative to climate change and look for opportunities to in fact make your firm stronger,” he said.

“As our regulatory tools around climate change and our reporting tools around climate change continue to develop, there will be a bedrock requirement for firms to address that.”

Even smaller businesses would soon need to address demands from consumers, larger supply chain customers and their staff for transparency around their environmental footprint.

“There’ll be some protections for a while but transparency around reporting is just going to continue to increase,” Mr Armour said.

Across all directors, only 11 per cent disagreed that their board needed to do more to respond to climate change, but that rose to 22 per cent in the mining sector.
“It’s not that people ignore the issue, it’s that they don’t know where to start."
AICD managing director Angus Armour
One in four directors in the mining sector were “not at all concerned” about climate risk to their company, which compared to one in five across all industries and only 8 per cent in the agriculture, forestry and fishing sector.

Mr Armour said many mining companies already dedicated significant resources to the issue which could explain why their boards were less likely to think more work was required, but the data collected was inconclusive.

Directors of ASX-listed companies were less likely to be “extremely” or “somewhat” concerned about how climate change risks (48 per cent) compared to directors on government or public sector boards (70 per cent). Around half also saw opportunities for their organisation by proactively responding to climate change.

Environmental protection
Mr Armour said that regulatory or political uncertainty and the “operational effects” of climate change were the two largest concerns directors had about how climate change would affect their business, followed by the impact on profit of mitigating climate change.

Directors said the biggest obstacle to acting was the absence of a settled national climate change policy (46 per cent, the most common response) while 38 per cent said their board did not have the time or resources to deal with it.

Less than half of directors (46 per cent) said their board had embedded climate change in their risk management framework, which the report says, “suggests that risk may not be adequately monitored at board level.“

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