What do board members need to think about to avoid being sued by the climate movement?
Climate change has transitioned from a distant environmental concern to a pressing business issue. The rhetoric between business and climate activists has hardened. Friends of the Earth in the Netherlands have sued Shell and are now in the process of suing ING. What should boards do? In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses the thinking behind the move to sue ING Bank and learnings for boards with Donald Pols. Donald is the Director of Friends of the Earth in the Netherlands. “We can and will manage to address dangerous climate change if all relevant actors contribute, including the financial sector.”Donald is bringing the climate fight to boardrooms. He cites the reality of the regulatory gap as a key factor- He explains that while governments sign agreements and individual countries make pledges, large multinationals often have no one person or entity truly holding them accountable. Often, the financial sector operates in this regulatory gap, which is why he is using a lawsuit against ING to make an example as ING is one of the largest financiers of fossil fuels in the world, which gives it a unique opportunity to shape climate change impacts. “It's time to start acting on all these initiatives instead of only talking.”The first step in a democratic society is always a dialogue and a conversation, but Donald notes that conversations have happening for decades with no real progress. So, taking things to court is an intentional escalation. Donald sees going to court as part of the democratic process, which allows parties with a difference of opinion to get a judgment on those opinions. It also creates a way to close the regulatory gap. “If there's only one message I can give to your listeners, it is that climate change is not an ESG issue. It's a material issue.”Donald feels that for boards to truly take climate change seriously, they must stop treating it as a side issue. It is a material issue that is crucial for the financial continuity of a company. “What we notice in our engagement with companies on a C-level is that climate change knowledge is lacking in general.”In Donald’s view, acting on climate change starts with leadership from the top. Boards must make climate change a company-wide priority. Ideally, this will result in climate change being a fixed issue on the board agenda, whose importance influences policies not just for the firm, but also for suppliers and clients.“The boards of multinationals that I visit are concerned with achieving and measuring impact. However, the way we measure impact is fundamentally different.”As Donald sees it, most boards measure shareholder value. Firms in the activism and non-profit space, measure stakeholder value. For them, it is less about how much money is made and more about what noticeable changes are achieved and what societal support is won.The three top takeaways for effective boards from our conversation are:1. There's a need to act to prevent dangerous climate change, and this need has become a new societal norm applicable to all corporate and financial institutions. 2. Climate change is a material issue with fiduciary implications. Not acting in accordance with this responsibility already has and will have legal implications in the future.3. On a more personal note, you're a CEO, but you're also a parent and a grandparent. You're a board member, but you're also responsible for life on Earth, especially for your family. The discussions you have and the decisions you make daily will have an impact on the future of our shared planet. There's no profit on a dead planet. Act accordingly.