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Governance & Internal Oversight1 April 2019Liaison Delegate Meeting
Today’s Agenda
Introduction and overview It is Boards’ duty to take the leadGovernance & sustainability Project phases & collaboration Panel Breakout discussionQuestions & close
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Introduction and overviewMario Abela, WBCSD
TARGETED SOLUTIONSEach system transformation is set up as a WBCSD Program with practical Projects
Redefining Value Vision We work with business to improve decision-making and external disclosure which will transform the financial system to reward the most sustainable companies
Business makes better decisions and discloses
more meaningful information
We work with business to improve decision-making and external disclosure
Financial system uses this
information to make more informed
decisions
to transform the financial system Capital flows are
directed to more sustainable companies
to reward the most sustainable companies.
Investor Decision-Making
Redefining Value Structure
External Disclosure
Investor Decision-Making
Business Decision-Making
External DisclosureBusiness Decision-Making• Enterprise Risk Management*• Integrated Performance Management*• Measurement & Valuation• Governance & Internal Oversight*
• The Reporting Exchange*• Purpose-Driven Disclosure*• Assurance & Internal Controls*• TCFD Preparer Forums**• Reporting Matters
• Aligning Retirement Assets
* Project funding by the Gordon and Betty Moore Foundation** Project funding by Bloomberg Philanthropies
Our work is split into three Program Areas and ten Projects
Why look at governace?
• Decisions are always bounded by the business model and the law
• Directors have a general duty of care along with their fiduciary duties
• Those responsibilities are mirrored in those of the management of the company
• Breaching these responsibilities can result in severe sanctions which ultimately harm the success of the company
• Increasingly directors and management are being held to account for their actions (and inactions)
Supported by our Global Network Partners in the 11 countries and local chapters of Deloitte and Baker McKenzie
Governance & Internal Oversight Partners
Theory of change
We are working with companies and partners across the world to integrate sustainability considerations into corporate governance strategies.
We’re collaborating with key stakeholders to ensure that the solutions presented are useful and effective for board directors in key jurisdictions.
This project will help board directors improve their decision-making processes to protect and preserve long-term value.
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It is Boards’ duty to take the leadPhilippe Joubert, Earth on Board
Business is recognized as a solutionbut business must change
A collective responsibility starting at board level
2015, a tipping point
196 parties have agreed to:Limit warning well below 2°C above pre-industrial levelsAim for a net-zero emissions world between 2050 and 2100
It is Board’s duty to take the leadDirectors duties
2. Exercise due diligence or reasonable care
3. Comply with disclosure requirements
1. Act in the interest of the company
1. Act in the interest of the company
Shareholders own shares…Not the company
JACK WELCHGE CEO 1981-2001
“On the face of it, shareholder valueis the dumbest idea in the world”
The narrow focus on short-term returns has affected the very core of corporate governance
Are we creating and bringing value to all stakeholders?
We need to go back to the purpose of business
LAURENCE FINKBLACKROCK CEO2018’s letter to CEOs of S&P500
« Society is demanding that companies, both public and private, serve a social purpose […]the board is essential to helping a company articulate and pursue its purpose »
A company purpose is
What attracts and inspires your staff,
Why your customers value you, your supply chain ishonestly proud of working for you and your shareholders invest
2. Exercisedue diligence / reasonable care
Boards can no longer claimto ignore climate change
and its risks
PHYSICALRISKS
LEGALRISKS
TRANSITION RISKS
There are new risks
Thailand, 2011World Bank estimated US$45.7bn Economic damages and losses
We have disruptedthe water cycle
Brazil dam bursts…October 201619 PEOPLE DEADJanuary 2019
“We will create a cushion of safety far superior to what we have today to guarantee this never happens again”VALE CEO, SCHVARTSMAN
171 PEOPLE DEAD141 PEOPLE STILL MISSING
66%of water used foragricultureis obtained throughenergy-intensivepumping
15%of global water resources every year
The energy sectorwithdraws
Sustainability regulations are increasing
Stock of climate change legislation by the end of 2016
1,400
1,200
1,000
800
600
400
200
0Tota
l law
san
d ex
ecut
ive
polic
ies
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Total legislative
Total executive
“Even people who act accordingly to the law must be held responsible for damage they cause”The judges said.
SAUL LUCIANO LLIUYA,PERUVIAN FARMER VS
What is yourSocial Licence to Operate ?
"It takes 20 years to build a reputation and 5 minutes
to ruin it."WARREN BUFFET
You can externalize operations Not responsibilities
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Rana Plaza, 2013: more than 1000 dead workers
Mark Carney & Michael R. Bloomberg
Mainstreamingclimate-relatedfinancial disclosures
3. Duties to comply with reporting and disclosure requirements
September 2018:The China Securities Regulatory Commission (CSRC) introduces new requirements:by 2020, all listed companies and bond issuers must disclose ESG risks
Chin-UK TCFD Pilot Group issuesThree-years plan for pilot commercial banks in China to apply TCFD
We need Earth Competent Boards
Boards with members who are
• proficient in sustainability, • with the right governance, • asking management the right questions
Where aresustainabilitytopicsdebated?
Audit & Risk
Strategy &Sustainability
Nomination &Compensation
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Boards proficient in sustainabilityCorporate
governance Environment Social Investments Business operations International Legal Digital
On what topics is your boardspending its time?
Casal & Caspar, McKinsey Quaterly 2014, « Building a forward-looking board »
“Directors still spend the bulk of their time on quarterly reports, audit reviews, budgets, and compliance –70 percent is not atypical.”
How should we go froma 2°C strategy
to a net-zero emissions one?
What are the possible environmental and social government regulations that could affect our companyin the future?
Where do we spend our lobbying budget?
Have we assessedthe risks of strandedassets?
How is ourinternal carbon price helping us to progress?
« We, future workers, are ready to question ourcomfort zone so that society changes profoundly.»
~30’000 students have signed
Are we attracting and retaining new talents?
We need Earth Competent Boards
Companies have a critical role to playin securing a better world
It is Boards’ duty to take the lead
There is no businessin a world in shambles
Business as usualconsidering nature as unlimitedand freeis…
Socially unacceptable
Legally dangerous
Economically stupid
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Governance and sustainability Eleanor Leach, WBCSD
Recently launched WBCSD governance report• Sustainability issues are relevant to all
businesses and are increasing in prevalence and severity.
• Governance is evolving fast and investors alongside other stakeholders are demanding greater transparency and improved oversight.
• Effective governance structures and metrics are key element to improving investor confidence in non-financial information and provide a better understanding of a companies’ prospects
• No longer can boards focus solely on maximising shareholder value.
Recently launched WBCSD governance report
Recently launchedSustainability can no longer be considered in isolation.
Whilst each country specific governance paradigm is different from the next, there are common themes and practices that support effective and responsible governance & oversight
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Project phases & CollaborationEleanor Leach, WBCSD
Governance & Internal Oversight Approach
Phase 1(a)Understanding the
governance landscape - literature
and regulation
Phase 1(b)Interviews with board members to discuss
sustainability agenda
Phase 2Development of
materials to integrate sustainability
October – April 2019 April – October 2019
Company Interviews
Three-pronged approachTo maximise impact and scale of this project we are operating with a three-pronged approach.
Directors Advisors Investors
We are not seeking to re-invent the wheel, but rather build on the work done by others and ensure our projects are carried out by collaborating and engaging with key parties in this field
Alignment and collaboration
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Panel discussion
Panel DiscussionModerated by Mario Abela, Director - Redefining Value
David Hackett, Partner, Baker McKenzie
Gloria SantonaOf Counsel, Baker McKenzie
Olivier JanPartner, Deloitte
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Breakout discussion
Breakout DiscussionIn small groups discuss the following questions:
What challenges do you face when engaging with your board on sustainability?
How and what training materials might support your engagement with the board?
Oct
Oct
JanPhase 1 (b) - InterviewsBeginning interviews with non-executive directors identified at companies in 11 countries
DecWBCSD LD MeetingJoint presentation at WBCSD LD Meeting
Phase 1 (a) - ResearchWe have begun researching the current landscape in 11 countries.
Oct
Apr
Governance & Internal Oversight Timeline
May
Phase 1 ReportPhase 1 report with findings from research and board interviews launched.
Meeting held with HLAG to share ideas for proposed tools.
Jan
WBCSD Council Launched completed board training materials at Council Meeting in Lisbon
Oct
May
AprPhase 2 - MaterialsWBCSD to develop training materials for boards to use to better integrate sustainability into governance
AprINSEAD Conference8-9 April –Fontainebleau, Paris Board director training on sustainability in partnership with INSEAD and the Hoffman Institute.
ecoDa Conference 7 May, in partnership with ecoDaand PwC we will be holding a 1 day conference in Brussels
Oct
AprCeres ConferenceBreakfast session, Wednesday 1 May 29 April – 1 May
INSEAD Board director training
Register here.
Board director training at INSEAD Paris Campus, Fontainebleau
8-9 April 2019
This high impact two-day event aims to address sustainability from multi-level perspectives including both macro and micro approaches with a particular focus on boards’ responsibilities and on validating what a curriculum for board members committed to such a responsibility might look like.
Redefining Value Montreux Sessions
Monday11:00 - 13:00 Investing Responsibly. Retiring Responsibly11:00 - 16:00 Social & Human Capital Workshop
Wednesday 09:00 - 10:30 Briefing Session Redefining Value11:00 - 13:00 Performance & Risk Management14:30 - 16:00 Disclosure Dilemmas & Decisions
Thursday09:00 - 10:30 Building Resilience through Enterprise Risk Management11:00 - 13:00 Turning Sustainability into a Competitive Advantage
Questions & closeMario Abela, WBCSD
WBCSD (Geneva)Maison de la PaixChemin Eugène-Rigot 2BCP 2075 1211 Geneva 1
WBCSD (New York)29 East 19th Street, 4th FloorNew York, NY 10003USA
WBCSD (Delhi)WBCSD India, 4th Floor, Worldmark 2,Aerocity New Delhi 110 037India
WBCSD (London)WeWork Mansion House33 Queen StreetLondon EC4R 1BRUK
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