It’s understood that one of the most valuable characteristics Non-Executive Directors (NEDs) bring to a board is the depth of experience they bring with them. Traditionally this has been from the same vertical such as finance, investment, banking or law. That was fine perhaps a decade ago but in today’s multi-faceted, fast moving, compliance driven and hyper competitive environment this isn’t going to work anymore.
One facet of the modern business landscape that wasn’t a pressing issue a decade ago is achieving Net Zero. The UK Government’s strategy on Net Zero sets out policies and proposals for decarbonising all sectors of the UK economy to meet a Net Zero target by 2050. Sensibly, many firms are pulling this date forward to ensure compliance with the overall goal, by that date, but also to respond to the growing demand from clients, stakeholders and investors around the Net Zero initiatives of their suppliers. Remember, clients need to hit this goal too so waiting to start on decarbonising isn’t an option. Action is well underway in the broader marketplace now and activity around decarbonisation can mean the difference between gaining, retaining or losing existing clients, investment and market share.
Firms looking to decarbonise their supply chain will be required to collaborate with suppliers on their own decarbonisation efforts and if these are not in place or Net Zero goals are not hit – they will be forced to cease working with the supplier to protect their own Net Zero goal. This introduces potential regulatory, contractual and financial penalties and impacts.
Decarbonisation towards Net Zero is more than just business energy reduction compliance, which involves “adhering to various regulations and schemes aimed at improving energy efficiency and reducing carbon emissions.” Key initiatives for this include the Streamlined Energy and Carbon Reporting (SECR) and the Energy Savings Opportunity Scheme (ESOS). These are key but merely the start point.
Hitting Net Zero involves understanding what decarbonisation means across the Scope 1, 2 and 3 emissions, how these Scopes break down into individual Categories of emission sources and how to gather the business data around each and then develop a strategy to bring them down to zero. This is not common knowledge.
The cost and operational impact is far less when using a NED to realise this with internal teams compared to pulling in an external consultancy. The long term maintenance of Net Zero, a requirement too often overlooked, is also far more likely achieved using internal teams and a competent NED.
Setting the strategy early is critical and implementing working groups to enact them, the steering group to direct them and reporting progress in annual reports, shareholder updates and press releases are all examples of what the experience NED can assist with achieving.
As such this situation creates a unique opportunity for NEDs who are knowledgeable and experienced in how to decarbonise the firm they are appointed to and ultimately guide the board on how to achieve Net Zero through strategic planning and tactical interventions that span the workplace and supply chain.
Mark.
