Boards Can Continue to Lead the Way on Climate Governance
Harvard Business Review
by Lynn S. Paine and Suraj Srinivasan
The September, 2025 edition of the Hub highlights an article from Harvard Business Review which argues that corporate boards play a crucial role in shaping credible and effective climate governance—moving beyond compliance to strategy, innovation, and resilience. Despite a growing political backlash against ESG (environmental, social, and governance) initiatives—including nearly 320 anti-ESG bills across U.S. states, SEC rollbacks of climate disclosure rules, and corporate retreats from alliances—climate risks remain material business issues. Companies face accelerating challenges such as supply-chain disruptions, asset impairment, and changing consumer preferences, making climate oversight a strategic necessity rather than a trend.
The authors propose updated guidance for boards navigating this contentious landscape:
- Know Your Climate Profile – Develop a defensible, data-driven understanding of how climate affects the company and vice versa, using third-party verification, scenario planning, and robust stress testing.
- Define the Board’s Role – Clearly articulate climate oversight responsibilities in governance charters and align with fiduciary duties focused on risk management and long-term value creation.
- Build a Defensible Oversight Structure – Distribute climate responsibilities across committees (audit, risk, compensation) rather than concentrating them in a single ESG committee, signaling integration into core business processes.
- Build Expertise Thoughtfully – Ensure directors have business-relevant climate literacy through briefings, site visits, and independent education to strengthen credibility and decision-making.
- Clarify Climate Positioning – Maintain transparency and consistency, avoiding “greenhushing,” and ensure internal strategies align with public statements and investor communications.
- Probe Management Plans and Demand Accountability – Review climate strategies with the same rigor as financial plans, scrutinizing assumptions, roadmaps, and public defensibility.
- Tie Incentives to Operations – Where appropriate, link executive pay or performance reviews to auditable, outcome-driven climate metrics to signal serious intent.
- Acknowledge Trade-offs and Embrace Complexity – Move away from oversimplified ESG narratives and document how competing priorities are weighed, signaling integrity and resilience.
The article concludes that retreating from climate governance may offer temporary relief but poses long-term strategic risks. Boards must embed climate considerations into governance as a core business function, maintain transparency, and prepare for scrutiny to build stakeholder trust and organizational resilience.
Note: IICA duly acknowledge the authorship/ownership of the article and republishing the same only for educational purpose of ID Databank members.
