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The impact of technology on climate oversight: what board directors need to know
Corporate boards are experiencing the impact of climate change on multiple fronts. Mounting pressure from regulators, investors, shareholders, consumers, and their workforce is forcing companies to rethink their carbon emissions. Worsening droughts, fires, floods, and storms have prioritized the need to focus on the health of our communities and ecosystems. Beyond social responsibility, there’s also economic cost tied to each of these challenges.
The intersection of climate change and the emerging technologies used as part of a strategy to fight it will continue to push the boundaries of board governance and director acumen. To rise to the challenge posed by climate change, businesses need to engage their boards and directors need to recognize the important role they play. Upskilling directors on ESG and technology will help them fulfill their responsibility to provide oversight, asking the right questions and challenging management when appropriate.
Two main areas where technology can have a significant impact:
- It can create the trust and transparency needed in the supply chain so companies can establish goals for their footprint, measure each step of the way, and then accurately report their results.
- It can create efficiencies and sustainable structures to reduce carbon emission.
Curious what this will mean in practice? Here are examples of real-world challenges and the emerging technologies that can help solve them.
Supply chains suffer from lack of transparency, which leads to serious traceability issues. This not only makes it difficult to track goods throughout the entirety of the supply chain, but it makes it almost impossible to understand the climate impact of material sourcing, manufacturing, packaging and transportation decisions. This visibility into the entirety of the supply chain is crucial for companies that want to reduce the massive impact that supply chain emissions play in their overall greenhouse gas footprint. To obtain this level of visibility, some businesses are turning to blockchain technologies.
Read more in the report
Having too much or too little inventory on hand, or having products too far away from customers who want to buy them, can contribute to supply chain inefficiency and increase greenhouse gas emissions. Artificial intelligence (AI) can help companies improve forecasting, respond to shifts in demand, and automate repetitive tasks – not only reducing their greenhouse emissions, but improving financial performance as well.
Read more in the report
The board’s role—what directors should be thinking about
Climate risk oversight will assume an increasingly prominent place on boards' agendas in the coming years, particularly now that the SEC had adopted climate-related disclosure rules. Asking the right questions about the intersection of climate impact and technology will only become more important for directors as stakeholder focus intensifies.
When technology investments are on the table, questions directors can pose to management teams include:
- How does this technology help us meet our commitments, or do even more?
- How do we know this technology is fit for purpose, and what is the risk if it is not?
- Who else has implemented technology like this successfully? How can we tap into those successful experiences?
- How will we measure our ROI on this investment? Through a strictly economic lense, or through a social impact lens as well?
Conclusion
Boards of directors have an important role to play as companies increasingly focus on mitigating their climate impact. Emerging technologies are important tools that can help companies with some of the most challenging aspects of that work – including in the supply chain. Corporate directors will need to understand both the climate risks facing their companies and the technologies that can help overcome them to provide effective oversight.
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