IOD Special Talk - Leading by Example

The Board's Role in Shaping Corporate Sustainability and Ethical Leadership

Good afternoon, everyone. It's a pleasure to be here today in such an important area of trying to see how boards could play an important role in addressing climate change. I think that we could not have asked for a better set of panelists who have such diverse experiences.

So I think the urgency of climate change and sustainable development calls for strategic oversight and decisive action as we think of the highest levels of corporate governance. ESG compliance and SDGs really need to be highlighted in a much more important way than how they're being done today. What we think is happening today is that this sort of option is going to become a necessity in the future. When I look at 20-30 years ago, quality was a challenge, and we had these ISO procedures. It was like a procedure. Soon, it became part of the culture of what we do on this front.

We are at that early stage here, where we are still trying to figure this out, and so I think it's really important to start to recognize that what we consider an additional activity today, is going to be seen as standard practice in the future, and how do we build on this front?

It's the board's foremost responsibility to address climate goals, not just as a peripheral concern but by integrating them into the core business strategy.

The importance of board leadership and a top-down push when implementing significant changes cannot be overstated. The board's role in driving this change and embedding it in the organisation's culture is crucial. I remember when I started 'Reva', a technology company. What is most important in a technology company is IT, so for the first time, we created an IT committee. We met a day before the board meeting and then presented to the board how we think of technology. Similarly, in ESG, it's not just about another meeting that has to happen; it's about a focus committee at the senior board level. The leadership should come in and try to set this up in a much more important way, and having an organised committee really brings value in the early days of setting a culture.

We need ESG right through.

I also feel that whenever we bring something on, it is always seen as, 'Oh my God, another thing to do'. But, in this case, it is actually an opportunity, more than actually an added thing to do. If you view ESG not as compliance or an additional cost but as an opportunity for innovation and growth, there can be a multiplier effect. I remember when we put up one of our facilities 10-15 years ago, which is a platinum facility. Everyone said that it was very expensive. I said, "Well, it's renewable energy. It costs 20% less to make and 30% less to operate." And the next thing everyone said was, “Can I get the blueprint to put this up?” So, it's not necessary that it has to be more expensive. If we structure and integrate it with our business and start to think through and figure how we can make it more affordable.

In today's conversation, as we speak, we are thinking of five key areas.

What is a board's preparation for COP 29 and the action plan to achieve zero emissions? It is developing and endorsing comprehensive plans across this area. Ensuring science-based accounting in how we look at emission deductions and ensuring transparency in the entire process.

The second is about integrating climate goals with business strategy. It's the board's foremost responsibility to address climate goals, not just as a peripheral concern but by integrating them into the core business strategy. Aligning the mission and vision with sustainability goals is very important. In our company, we track carbon emissions daily and publicly share this information. Over the past few years, we've recorded half a million kilometers and 60,000 tons of carbon emissions. This data is visible to everyone every day, ensuring that everyone is aware of their contributions and understands their role in our environmental efforts. This is also a matter of strategic planning. We need to incorporate the risks and opportunities associated with climate change into our annual strategic planning process. This involves considering both the potential risks and mitigation strategies related to climate change, while also setting clear targets around the SDGs and net-zero goals.

The third area is enhancing global preparedness and adaptability to withstand climate change, as well as potential strategies for boards to enhance their preparedness. Building adaptive infrastructure in operations that includes risk assessment and management would be very important, as would collaborating with stakeholders around this to ensure that we can create a structure around it.

The fourth is monitoring and accountability. This is quite obvious. This is about performance metrics, risk management, and setting up board committees. When we got one of our external investors a few years ago, they said, “We need ESG right through'. And again, we said, 'oh, another thing to do'; but it's amazing what it did for us. It allowed us to have clear audits, it improved each aspect of our business, and it brought in accountability, and I think that was a great move for us. In that very early stage, we had the opportunity and had the experience of a large investor who had these processes and their teams from globally coming to work with our teams to be a part of this culture. That was not just at the board level but at the operating level. So I think bringing this sort of accountability, not just at the senior level, but how we bring it to an operating level, by the manufacturing flow, reporting, human resources, and it becomes part of the culture.

And the last thing is ethical leadership and corporate culture. A very important part is 'lead by example'. Unless the board leads by example, it won't happen. What is your carbon footprint? Are you setting the right example for your company? Or are you saying something but doing something else? It is very easily not noticeable if that's the case. So it's very important if you're doing a culture shift.

How do boards start to lead by example, create these ethical standards, and empower our employees? We look forward to hearing from each panelist about their experiences in these five areas, including how they implement these practices in their companies and the lessons we can learn from them.