The role of the company secretary in tackling the climate crisis
By Eleanor Evans | 23/01/2020 in Blog posts
The company secretary sits at the heart of the organisation, a bridge between the executive and the board and holds a uniquely privileged position with an organisation wide view. So what role can (and should) the company secretary play in tackling the climate crisis?
1. Board agenda
The company secretary will support the chair with setting the agenda. In the past the implications of climate change may only have been discussed at the sustainability committee and formed only a small part of its agenda alongside health and safety, ethics and community issues. This was not dissimilar to how boards focused on strategy, at a single offsite a year. Now good boards will address strategy and sustainability at all meetings – sustainability is now a mainstream governance matter and must be integrated with all decision making.
The climate (or environmental) function in most companies was, until recently, usually led by a subject matter expert reporting to the head of health, safety and environment. It remains rare to find this function well represented on the executive committee. Some companies have moved the climate head under the head of strategy. Wherever the climate head sits, a company secretary who supports them by getting them an audience with the right people and who guides them on presentation and influencing skills will be a crucial ally.
Traditionally the bulk of investor engagement would be handled by the Investor Relations Team with the CEO and CFO. Some engagement would be handled by the chair and the company secretary – often on more sensitive issues of governance or succession. Shareholder activism on the climate agenda in the UK became mainstream in 2015 and the company secretary has been a central figure with investors who engage in climate change discussions in many companies ever since. This has been a significant learning experience for some company secretaries, but a rewarding one for them and the investor relations team.
How many company secretaries are responsible for the annual reporting suite and sit on the disclosure committee, but until recently were not fully engaged by colleagues with the sustainability report? That report will help company secretaries understand first hand all the activities and issues and the metrics and targets. They will be ever mindful of creating hostages to fortune by promising future deliverables and understand the liability for false or misleading statements and will guide the editorial team accordingly.
5. Risk (and opportunity) management
The company secretary will work closely with the head of risk to ensure that board and committee papers and discussions are optimised to discharge the board and audit committee’s responsibilities for risk management (and internal control). Climate change is now a top global risk, but it also brings business opportunities and it is good to see more and more focus on the opportunities, setting climate issues apart from others areas of the risk agenda.
Take for example, SSE plc’s CEO statement in their 2019 annual report: “A world of low-carbon opportunity. The opportunities afforded by decarbonisation are being driven by a number of key trends….I would summarise them as: electrification of heat and transport in the energy system; carbon pricing, legally-binding carbon targets and associated support mechanisms; a wave of innovation that is making the technological enablers of decarbonisation more affordable; and an inflow of capital into the sector, which is increasingly drawn to lower-emission assets and technologies“.
6. Metrics & targets
Companies are finding their way with how best to set measurable metrics and targets for remuneration purposes (as are the remuneration consultants). A well briefed company secretary will be instrumental in devising appropriate messaging as part of a consultation with shareholders ahead of the inevitable changes to a company’s remuneration policy (with many coming up for renewal in 2020). They will also likely be involved in proxy solicitation ahead of the vote.
7. Regulators & policy
The company secretary, whether or not a lawyer (and whether or not also the general counsel) will be instrumental in considering the requirements of regulation and disclosure against that regulation. They are also well versed with meeting with regulators to discuss reform and in working with industry groups to develop thinking. The climate crisis will yield numerous opportunities for engagement on matters of public policy and a company secretary will assist the chair, CEO and corporate relations in development of a market position.
8. Decision making
A board (or committee) will make the best decisions if they have been provided with the right information, in the right way, at the right time, allowing for a meaningful debate and consequently the right decision. No amount of drafting of board minutes will be a substitute for poor information or debate. So, the company secretary will have a crucial role in working with colleagues to seek to ensure the best possible paperwork is prepared. Happily, this is now topical given the renewed focus in the UK on section 172 of the companies Act 2006.
9. Board review
As an attendee at all board and committee meetings and someone who will be a central part, with the chairs, of the annual board review process, the company secretary will understand the behavioural dynamics around the board and committee table and have unique insights for the board review. They will also be mindful of the climate crisis skills needed around the board table – both for hiring and continuing education – as we go into 2020.
In conclusion, the company secretary’s role in putting the climate crisis on the board agenda is vital. Board time is precious and pressured, but what can be more important to discuss than the biggest existential risk of our time? This affects every company, either through its customers, investors, suppliers or employees and often all of these. It is central to the company secretary’s role to make sure these matters are properly considered and the board has the right information to make informed decisions. As company secretary, encourage your chair and non-executive directors to join at www.chapterzero.org.uk to make use of the Chapter Zero board toolkit and attend the range of events planned for 2020 – and join yourself. Chapter Zero will support you in getting the climate crisis onto the agenda. Build your own knowledge, take the time to understand the science sitting behind the metrics and avoid initiatives that do not have significant impact.