swissVR Monitor: Why should members of Boards concern themselves with sustainability?
Barbara Dubach: The work of Boards is increasingly shaped by the need to respond to global challenges including climate change and the human rights aspects of value chains. Most recently, changes in legislation and regulation and pressure from shareholders, investors and NGOs have increased the importance and profile of sustainability. One example is the lawsuit launched in March 2022 by Shell shareholder ClientEarth. If this action were successful, companies and their Boards would be under a statutory obligation to take appropriate account of the impact their activities have on society and the environment.
Implementation of the indirect counter-proposal to the Swiss Responsible Business Initiative (OR 964a) also means that reports on non-financial areas[1] must be approved by a company’s Board of Directors and presented to its General Meeting. And following implementation of the EU’s Corporate Sustainability Reporting Directive (CSRD), some EU Member States (including France) are planning to prosecute Board members if, for example, their company’s sustainability report has not been externally audited.
Sustainability is now one of the key factors in long-term business success, with a significant impact on company performance, risk management and reputation. And that’s why sustainability needs to be right at the top of the agenda for the Board of Directors.
[1]Since 1 January 2023, OR 964a has entered into force for listed companies and financial institutions with more than 500 full-time equivalent posts on an annual average in two successive financial years and a balance sheet total of more than CHF 20 million or sales revenue of more than CHF 40 million in two successive financial years.
swissVR Monitor: How important do you think Sustainability Committees are to their Boards?
Barbara Dubach: Sustainability Committees offer scope for integrating aspects of sustainability into the work of the Board. However, there are other ways of achieving this.[2] Sustainability can, for example, be made an integral part of the full range of Board activities and decision-making. It can be integrated into the responsibilities of one or more existing Board committees. And finally, Boards can specifically appoint a member with the necessary expertise and experience in sustainability.
To ensure that sustainability issues are properly addressed, Boards need to integrate them fully into Board meetings, set up a Sustainability Committee or ensure that other existing committees consider these issues, and co-opt or appoint specialists with long experience of sustainability and management. Transparent reporting on the governance structure is crucial.
[2] One is designing sustainability governance (Corporate Governance Centre, INSEAD 2022).
swissVR Monitor: How important are experience and expertise in sustainability within the Board?
Barbara Dubach: It is strategically important for the Board to have both experience and expertise in this area. Board members need the right level of expertise to be able to challenge management on sustainability strategy and goals and to monitor achievement of those goals.
When it comes to statutory targets and reporting requirements, there is a risk that management teams and Boards focus on delivering the absolute minimum. But even compliance with regulatory requirements and risk management is no guarantee of long-term corporate success.
As the body that shapes company strategy, the Board plays a crucial role in identifying new business opportunities that also help tackle current challenges, such as climate change. It is vital to ensure that stakeholders and interest groups are involved effectively so that companies continue to fulfil their responsibilities to these groups.
swissVR Monitor: How would you rate the levels of experience and expertise that Boards currently have in this area?
Barbara Dubach: Many Boards lack expertise in sustainability, whereas most have good levels of financial and legal expertise. Our analysis in the area of focused reporting shows, for example, that just 23% of Board members from 151 companies have an appropriate level of expertise in sustainability. And the most recent issue of ‘Reporting Matters’ suggests that only 16% of members of the World Business Council for Sustainable Development (WBCSD) have relevant expertise at Board level. There is an urgent need for improvement here, and ESG4Boards (esg4boards.org) is involved in closing this gap. Our aim is that by 2030, 80% of Swiss companies with more than 250 employees will have embedded ESG as part of the work of their Board and demonstrated to their workforce that they have the necessary skills and expertise. Building such expertise is absolutely crucial because sustainability is ever more complex and requires in-depth knowledge.
swissVR Monitor: What is your advice for Boards that struggle to deal with sustainability issues or have little experience and expertise in this area?
Barbara Dubach: Research studies show that the demands on Boards are increasing and that Boards need to keep on top of the issue to ensure that they keep abreast of the regulatory framework and the challenges and opportunities facing their company. This will also ensure that Boards are able to respond promptly, fulfilling their duty of care and minimising risk.
Research studies show that the demands on Boards are increasing and that Boards need to keep on top of the issue to ensure that they keep abreast of the regulatory framework and the challenges and opportunities facing their company. This will also ensure that Boards are able to respond promptly, fulfilling their duty of care and minimising risk.
One staged approach would be to organise workshops, providing opportunities for Board members to talk to experts and external stakeholders, enable them to take part in training (such as in UN Global Compact or Competent Boards), and to appoint experts with years of management and sustainability experience. ESG4Boards supports initiatives to ensure that ESG expertise is widely anchored in Boards of Directors by 2030.
Barbara Dubach
Member of the Board of ESG4Boards, swisscleantech and PUSCH Praktischer Umweltschutz and President of the Board of Holzheizkraftwerk Aubrugg
Barbara Dubach has been a passionate exponent of sustainability for many years. As founder and CEO of sustainable think-tank engageability, she created a competence centre for sustainability and co-creation. Since 1 October 2023, she has also been Executive Director of Innovate 4 Nature, an accelerator for environmental solutions. Barbara Dubach is President of the Board of Holzheizkraftwerk Aubrugg. She also serves on the Supervisory Board of Pusch, Alternative Bank Schweiz’s Council for Sustainable Investment, and Swisscleantech and is the co-initiator of ESG4Boards. Barbara Dubach has many years’ international experience in industry and management including as Senior Vice-President of Holcim Ltd., as Director of the World Business Council for Sustainable Development (WBCSD), and as an environmental economist with the Swiss Federal Office for the Environment. Her academic qualifications include a degree in economics from the University of Zurich and a PhD from the University of St. Gallen on ‘Managing environmental communication in multinational companies’.