The COVID-19 pandemic is still a major concern. But as vaccination efforts continue, now is the time to turn to the future. Boards need to address issues that cropped up during 2020 and prepare for what comes next.
In 2020, corporate boards faced a host of unexpected challenges, and the challenges haven’t stopped coming. But for 2021, I see boards making an impact by focusing on three things: climate change, diversity and inclusion (D&I) and crisis management.
Environmental, social and governance (ESG) issues have been dominating governance agendas like never before. Institutional shareholders, regulators and other stakeholders are pushing companies to do more. But many are not yet heeding the call — particularly when it comes to confronting climate change. In the latest PwC US Pulse Survey of C-suite executives, which polled 732 C-suite executives and corporate board directors between March 8 and March 12, only 31 percent of directors report their company is “very focused” on climate-related measures. In fact, they ranked it last on the list of ESG priorities after data privacy and security (77 percent), worker health and safety (74 percent), board diversity and inclusion (68 percent), workforce diversity and inclusion (62 percent) and pay equity (50 percent). With climate change among the most critical areas of focus for long-term strategic planning, boards and companies can’t afford to not pay attention.
On the other hand, when it comes to issues of diversity and inclusion, directors report that their boards and companies are quite engaged. Ninety-eight percent (98 percent) of directors say their company is very or somewhat focused on workforce D&I initiatives. What’s more, the vast majority of directors (83 percent) surveyed in our latest Annual Corporate Directors Survey agree that companies should be doing more to promote gender and racial diversity in the workplace. So while boards support their companies’ focus, the challenge is in reaching a consensus on how exactly to do that. For example, only 39 percent of directors say D&I goals should be included in their company’s executive pay plans, which would directly hold executives accountable for results on these initiatives.
Another area for growth is in crisis management. Despite the fact that most companies confronted a major unexpected business crisis in 2020, only 11 percent of directors in the Pulse Survey ranked it a top priority for 2021. This, after fewer than half of directors (37 percent) said they understood their company’s crisis management plan well in 2020.
With the post-pandemic economy evolving, now is the time for boards to get ahead of these issues. Here’s how.
1. Challenge Management on Climate Issues
The Biden administration has made combating climate change a top priority. And because climate-related issues can pose significant threats to business operations, investors and other stakeholders are calling for companies to increase their ESG disclosures. Yet at many companies, climate change is still not being regularly discussed at the board level. There are a multitude of questions the board should ask when it comes to climate issues, and this data is so important for boards to have access to. It arms them so that they can use this data in strategy discussions. They can also use it to challenge management on whether climate issues are being baked into decision-making. Forward-thinking boards are making the time on their meeting calendars now to make sure climate change is a key part of strategy discussions.
2. Commit to Making Real D&I Changes
Directors and executives agree: More needs to be done when it comes to D&I. But that’s just the start. Actually bringing about change requires quantifiable goals and decisive action. Making progress on D&I starts with treating it like any other business initiative. It begins with data. By understanding where the company is now, the board can set milestones and measure progress toward achieving its diversity and inclusion objectives. Equipped with the right data, board members can spot trends, ask tough questions and keep an eye on problem areas. It might also be time to consider what kinds of D&I metrics to include in the company’s executive compensation plans.
3. Double Down on Crisis Planning
Now that we are more than a year out from the onset of the pandemic, boards and companies may want to leave this crisis in the past. But the truth is, we are still grappling with continued disruption from the pandemic. Now is the time for boards to apply what they have learned from the past year and revisit their crisis management plans. Make sure that the board and the company are better positioned to handle the next crisis.
Forward-thinking boards can really use this past year as an opportunity. By taking the time to reflect on the lessons they’ve learned, boards can forge a path forward and make significant, long-lasting changes that will not only benefit their companies, but society at large.
