What’s in a Board?Responsible directorship for the sustainability era
- 5 April 2024
- Posted by: Future Energy
- Category: Energy excellence
In 2022, Yvon Chouinard, former climber and founder of the outdoor apparel company, Patagonia, made Earth the company’s largest shareholder. Practically, he and his family transferred majority ownership (98%) of the $3 billion dollar company to a non-profit organization, thus ushering in a new era of steward-ownership in corporate governance. Most companies can’t afford this all-out effort towards sustainability, but they can select board members with an eye towards environmental responsibility.
Environmental stewardship at the corporate level is not only responsible, the rise of activist investing demonstrates it can also be essential to a company’s financial success. Further, regulations in the EU and elsewhere surrounding ESG make sustainability an important component of a company’s ability to do business.
Experienced boards can bring valuable levels of industry expertise to a company but they can also carry the baggage of outdated ideas. Selecting and training a balanced, future-thinking board is key to a company’s triple bottom line: people, planet, and profit.
Composition
The best way to ensure success with a board long-term is in picking the right members with the right combinations of strengths and interests. For a small to mid-size company, the ideal board composition might be:
- 2-3 founders
- 1-3 investors
- 1-2 industry professionals
So where can a company find potential board members? Professional networks and industry events are trusted places, but companies might also turn to leaders in environmental activism, the conservation space, and non-profit organizations.
Executives should consider how board members might complement their business, and what the ideal combination of executives to non-executives might be for their company.
Skills and experience
It’s no secret that boards representing a diverse selection of talents, skills, and expertise have the best ability to steer the ship. Traditionally, leaders with experience in finance, capital-raising, industry skills, and leadership development have been at the front of mind.
Now, companies might also look to consider members with expertise in:
- health, safety, and the environment
- communication
- human capital
- risk and crisis management
- marketing and public relations.
Companies should ensure it has board members with a knowledge of climate change issues relevant to the business and its stakeholders.
Training and reporting
Once a board has been selected, onboarding and training becomes a crucial part of setting them up for success. Executives will have to decide on the best ways to educate board members on company values, roles and responsibilities for the board, and reporting procedures to stakeholders.
Important training sessions to think about might be:
- sustainability and ESG goal-setting, benchmarks, and accountability
- team building
- company goal-setting and long-term planning
- workplace culture
- governance guidelines
- reporting and compliance
- processes for an internal audit
- stakeholder engagement including reputation management and ethical leadership.
Term limits
Setting term limits on board membership helps companies to bring in fresh perspectives, prevent stagnation, and bolster expertise in industry changes. Companies might consider term lengths of one to three years with some rotation, allowing for board members to rotate on and off the board over time. For more regular turnover, a business might decide to set a ten-year cumulative term limit for non-executives. Whatever a company decides, its expectations for term limits should be clearly communicated in its board governance guidelines and transition periods should be place so that turnover is seamless.
Succession plans
Finally, having a good, clearly communicated succession plan with an eye towards younger, innovative leaders and diverse voices can assure that the company’s values are shepherded into the next generation.
At Future Energy Partners we can help businesses align their strategies with the demands of an increasingly eco-conscious marketplace. Our approach ensures that companies can navigate the complexities of incorporating sustainability into their core operations, from setting ESG goals to stakeholder engagement and reputation management. With a focus on fostering a board composition that prioritizes people, planet, and profit, Future Energy Partners empowers companies to lead with innovation, responsibility, and a forward-thinking mindset, ensuring they are well-equipped for success in the modern landscape of corporate governance.