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How boards are responding to the social responsibility challenge

April 28, 2022, 10:32 AM UTC

Good morning.

I wrote here recently that boards of directors face a growing challenge in monitoring the expanding social responsibilities of business. Climate tops the list, and the SEC’s recent landmark proposal on corporate climate disclosures underscores the size of the challenge.

How are boards responding? That was the subject of a roundtable discussion Fortune held yesterday, with both directors and chief sustainability officers of major companies. One clear takeaway for me was that sustainability is no longer being treated as a side conversation and is not being handled by separate committees. Instead, it is increasingly core to company strategies. Here’s Joe Jimenez, former CEO of Novartis:

“On the two big boards that I sit onGM and Procter & GambleESG goals are fully integrated into the business plans of those companies. For example, at General Motors, the company has made the commitment to only sell electric vehicles by 2035, and that is a massive commitment with massive climate implications. So the board is already monitoring and managing the pivot from internal combustion engines toward EVs over a very short period of time.”

I asked Charles Phillips, former CEO of Infor and a director of ViacomCBS and American Express, whether he was concerned that adding climate and other ESG goals to the performance metrics of CEOs would distract them from their profit-making focus. His response:

“I guess that train has kind of left the station…We’re not having that debate (about whether it’s a good idea) anymore. Instead, it’s how are we going to deal with this going forward, because more is coming.”

Lisa Edwards, president of Diligent, which was Fortune’s partner in yesterday’s meeting, told the assembled directors that shareholder proposals related to ESG “are up 22% in the first quarter”—putting additional pressure on boards to get serious on climate.

Much of the discussion yesterday centered on so-called Scope 3 emissions—those caused by a company’s suppliers and customers. That’s the most difficult part for companies to measure and monitor. But Virginie Helias, chief sustainability officer of P&G, said it is also the most important. “For P&G, consumer use is over 80% of our emissions, and it’s basically the heated water you use when you shave, or when you wash your hands, your clothes, your dishes.” She said the company has made it a high priority to innovate so products require less hot water use.

Jennifer Anderson, head of sustainability at Carrier, advised companies to start small, breaking their climate commitments “into smaller pieces to make it very specific, very tangible, and set some very specific goals.” Jimenez echoed that advice. “Don’t let the enormity of this paralyze you. Just get started, and as Jennifer said, break it down into small pieces…Because the way we set objectives, the way we measure, and the way we report on this is going to evolve over time.”

More news below.

Alan Murray
@alansmurray

alan.murray@fortune.com

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This edition of CEO Daily was edited by David Meyer.

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