Sara Boettiger is an economist and leading expert in corporate sustainability, global agriculture, and food security. Previously, at Bayer Crop Science, she was Senior Vice President, Global Head of Public Affairs, Science & Sustainability. She currently advises companies, foundations and governments, and sits on the Advisory Committee of the Export-Import Bank of the US. She is passionate about helping people, organizations and governments navigate the rapidly changing sustainability transition toward lower greenhouse gases, adapting to climate change, improving biodiversity, and creating a more resilient food system. Formerly, she served as Deputy Director at the Bill & Melinda Gates Foundation, taught economics at UC Berkeley, was a faculty fellow at Harvard University’s Berkman Klein Center for Internet & Society, co-led the McKinsey Center for Agricultural Transformation, was a member of the World Economic Forum’s Global Agenda Councils, served as Chair of the international agriculture center, CIMMYT and co-founded three non-profits. She is a published author (Nature Biotechnology, Scientific American, MIT Innovations Journal, Journal of International Biotech Law) and has been an invited speaker at The White House, G20, US Federal Reserve, Harvard Business School, Harvard Law School, World Food Prize, Summit Series.
Climate and sustainability issues are coming up all over the place in companies now. The question is how to manage them strategically when leaders in different parts of the company don’t necessarily have expertise or experience. A company needs to do three big things well with respect to sustainability: (1) manage sustainability risk, (2) make decisions about how to finance the transitions that are needed, and (3) ensure the company doesn’t miss key opportunities for value creation in sustainability. Leaders play a critical role in getting the mindset of the company to embrace the fact that we are living through an era of exceptional disruption and to put into practice a ‘perform’ vs. ‘transform’ balance. While all of the three goals above are essential, in my experience the third - identifying opportunities for value creation - is probably the hardest to embed across a company. This requires a particular type of leadership.
While many climate, sustainability and ESG issues have material implications for a company’s performance and competitiveness, there is also a lot of noise. It can be difficult to know where to focus and how to prioritize the things that matter most. The rigor of a more formal process (like a task force, or a committee) can help make sure companies get to the heart of what’s important, and then align around the decisions taken. Regardless of whether the issues are brought through normal channels or a designated “sustainability” forum, changing a company’s culture and decision-making processes to embrace these new issues requires board-level and c-suite-level leadership. But you asked about a ‘sustainability council’. So far, my comments about been about internal, roll-up-your-sleeves, types of processes. Some companies also opt for an external advisory council on sustainability. These can be an important component of governance, but it is challenging to make them effective.
The usual risk management systems in a company don’t need reinventing. But companies do need to find ways to integrate a new set of risks from climate, sustainability and ESG. Companies making this change have figured out how to help leaders learn fast to ensure that this new set of fast-changing risks are being managed. The types of climate-related financial risks now facing companies are reasonably well documented. They include physical risks from increasing frequency of extreme whether (e.g. asset damage, business continuity risk), and a multitude of transition risks related to changing climate, but also to changing policies, investors and markets. Just as with any other kind of risk, the ‘owners’ of sustainability risks span the breadth of the executive team. In many companies, there is a gap between risk monitoring, and well-functioning decision-making processes to manage the risks. This is no less true of sustainability risk.
Good sustainability risk management lies in integrating a wide range of sustainability risks into existing risk management tools or approaches that are already working in the company. There are, however, some basic challenges in doing this well. First, Leaders may not be used to framing these risks, or the risks may not even be on the radar. For example, the general counsel may need to proactively arrange for an external view of the changing ESG litigation landscape to be able to assess risk. Leaders, however, very quickly become familiar and identify external help as they need it. Another transition is often needed in the risk monitoring tools used by a company. Some advanced risk monitoring tools (e.g. supply chain risk management), are now integrating ESG risks, but it can be a project unpacking the details.
Managing sustainability risk has all of the challenges that risk management in general has, but it has two characteristics that need to be designed around. First, many leaders are not familiar with these types of risks, they don’t see them on the horizon, and they may not know where to get the right information to assess the risk or make a mitigation plan. Second, the external landscape of sustainability is changing exceptionally fast. Policies are changing, the litigation landscape is changing, consumer preferences are changing, the frequency of extreme weather is changing, the financial system is changing. In fact, we’re all trying to keep up. This is not the case in many other areas of risk for a company. For both of these two characteristics, it is critical to have a set of trusted outside advisors who are deep enough in the subject matter to help the company understand the risks.