Although, many countries are now in the stage of economic recovery period after two years experienced the crisis of Emerging Infection Disease, Covid19. A challenge for many organizations to adapt their businesses to the changing business environment, from dealing with an urgent epidemic crisis, supply chain problems that disrupt the production process, new technology that has become a part and has a greater impact on business operations or even the recent war, which has affected to the whole world. However, there is another intensified problem that should be urgently concerned which is the Climate Change. The problem has been affected by climate variability, frequent and severe monsoon storms and the heat wave in western hemisphere. The UK hosted the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow, Scotland in November 2021. The conference was a national collective agreement on a mission towards Net Zero in 2050. As private organizations, how can we participate and plan to manage these issues?

The Climate Change has been ranked as the top challenging for the Board and Mmanagement in every industry, referring to the World Economic Forum’s Global Risks Report 2022 has concluded that Climate Action Failure is prioritized the 1st risk in the top 10 list in 2022. This is an urgent issue for the government, private sectors and everyone to be concerned as many countries are now targeting to reduce their greenhouse gas emission by submitting the Carbon Reduction Plan within 2030.

Source: World Economic Forum

Once the climate has become an important issue, private organizations in business sectors need to perform and closely monitor in term of reporting and disclosure the relevant information, manage stakeholders expectations and the transition to Net Zero Economy. ‘The Guide for Boards and Management on the Path to Net Zero’ by Governance Institute of Australia (GIA) has compiled the guideline of the organizations that has already started to adjust their organizational direction to Net Zero Organizations. The guideline has answered the questions to many still do not see the climate change an urgent issue or not yet known how to begin or how to manage. 

In general, each organization is capable to manage the climate risk as their other aspects but what makes it more difficult is the uncertainty of the unpredictable impact and still not considered as the critical issue. Therefore, many organizations are not yet prepared to allocate their resources or planning to manage the risk. Definitely, the impact will cost more severe damage widely from next natural phenomena. Therefore, it is time for the organizations to consider and implement climate change risk management plan to mitigate its direct and indirect impacts. The Governance Institute of Australia (GIA) has provided the guideline on implementing risk management in climate change to answer these three major issues.

·       How the organizations put the climate issue in their organization’s core?

·       How the organizations manage the challenges during Net Zero Transition?

·       How the organizations ensure that their organization reports meet stakeholders expectations?

In this article, we have pulled out some part of the guideline on How to lead the climate change conversation considering both opportunities and risks to the organization?

Planning and preparing for climate change (Orchestrating the climate change conversation)

1.   Business perspective to organization

-     Understanding and Mapping the impacts of the climate change to organization from additional information of internal and external stakeholders on risks perspective and new opportunities to organization.

-     Mapping the impact of the organization’s activities to the climate. e.g. Where and how the companies generate emission through its operations and supply chain? 

2.   Managing Stakeholders Expectations

-     Consider the impact of the climate on different groups of stakeholders and prioritize.

-     Regularly monitor and report stakeholders expectations performance.

3.   Getting support from Board and Management

-     Board enquires the management about the approaches to manage climate impacts in risks and opportunities.

-     Management presents the implementation to the board to get support in conducting assessments, managing, reporting and disclosure.

4.   Make it an organizational culture

-     Include sustainability and climate goals in organization’s purpose to get employee engagement, followed by communicate and conduct activities to create understanding and be a part of the goals.

From the preparation above, planning and collecting climate change impacts to organizations and impact from the organization’s operations to the climate is the first important process along with considering the integration of Governance, Risk and Compliance (GRC) in order to develop the strategic plan for the Net Zero Transition.

However, the early stage of implementation on climate change risk management is instability as well as the journey to Net Zero Transition which influence the decision making of the organizations leaders. Although considering the issue as top priority might occur some financial impact to organization during the transition but at the same time, the organization might discover new business opportunity which create the organization’s sustainable growth. As the Board, your role is to oversight and support the management on organizational direction and perspective on the issue to ensure that the organization will be long term sustained.

Reference:

·       Governance Institute of Australia, Guide for boards and management on the path to net zero, April 2022

·       World Economic Forum, Global Risks 2022: The ‘disorderly’ net-zero transition is here and it’s time to embrace it, January 2022.

·       สมาคมส่งเสริมสถาบันกรรมการบริษัทไทย, แนวปฏิบัติที่ดีสำหรับคณะกรรมการเกี่ยวกับการบูรณาการ GRC, 2021

Ruangfon Jaismut
Senior CG Analyst
Thai Institute of Directors (IOD)