When it comes to net zero, it’s not always easy to determine what good looks like from a board perspective. As a topic, it’s hugely complex; as a journey, it’s unique to every business. Even starting a discussion can be difficult.
That’s the message that Chapter Zero, a network comprising more than 2,000 board chairs and non-executive directors, was getting from its members. They wanted some kind of tool or process to allow them to benchmark their current activities and start richer discussions about reaching net zero.
"We started thinking about the key elements that a non-executive director could look at to judge how well their board is handling these issues,” says Julie Baddeley, Chapter Zero’s Chair. “Then we thought, if we turn it into an assessment rather than a set of statements, we’ve got something that could be really useful for people.”
This became the Board Scorecard, a simple tool designed to give an overview of how an organisation is doing in relation to net zero. Based around 20 questions with a maximum score of five for each, it gives a total out of 100 to that board for its approach to net zero.
The answers to those questions, of course, could vary from person to person, but that’s the point of the Scorecard. The greater the number of people who fill it in, the more effective it is. Though the questionnaire is anonymised, it’s most useful when the entire board completes it, and the results are compared.
“Non-executive directors are not going to dig into the weeds. They want a fairly high-level way of assessing how well their board is doing. And that’s what we’ve put together,” Baddeley says.
Creating the Board Scorecard took six months as Chapter Zero applied its considerable collective expertise to the task of simplifying something uniquely complicated. Ask yourself the question, what does a good board do in relation to climate, and you can end up with many possible answers.
“It’s easy to create something that’s eight pages long, with 300 questions,” says Baddeley. “The challenge with our scorecard was reducing that detail into something that would actually cover the bases, and wasn’t overly simplistic. That’s how we ended up grouping our questions into four areas, each with five questions.”
Cutting down information can be a much trickier process than adding to it, so this was done carefully, Baddeley explains. “We started with a very long list, and we realised that if you scored high on certain questions, the chances were pretty strong that you would score high on another one. So having those two questions didn't add a lot. That allowed us to distil it to the bones of the assessment.”
Once that was done, the prototype scorecard needed to be tested. A range of people from various sectors were brought in to try out the scorecard and give feedback on how effective it was. “We pulled together groups of directors, got them to fill in the scorecard in advance and asked them what was useful and what was less so. We ran it by a really broad range of board members of companies of different sizes, different sectors, different stages in the advancement of their net zero commitments, to make sure that what we finally launched was really fit for purpose.”
That resulted in quite a lot of refinement of the questions, and grouping the questions slightly differently, says Baddeley: “It wasn’t a trivial task.”
Since its launch a month ago, more than 200 people have used the scorecard. As well as a useful tool for boards, it gives Chapter Zero a source of data that will help it to develop other tools for its members.
“Once the scorecard is well in use, we’ll start producing follow-up materials that will respond to the scores. Currently, you can take your score into your board discussion and that’s all great, but it will be much more valuable to then get something that says: ‘Because you had a lower score on this aspect, it would be a good idea to go and look at these materials, or take these actions.’ That’s the next step: to have a tailored programme of reading, events and other tools and materials that would assist with improving the lower scores. I hope we will have that later in the year.”
Finance for the Future
Julie Baddeley is a judge for this year’s Finance for the Future Awards, put together by ICAEW, Deloitte and Accounting for Sustainability.
“I was very, very impressed by the entries we had last year. I thought there was some outstanding activity going on in those businesses. I’m hoping that we will see not just more of the same, but good practice that goes beyond that. I’m definitely hoping to see examples where the thinking about climate impacts is stretching well beyond the company’s own operations. That did come into last year’s entries. But this year, I hope that has really moved forward.
“I’m also going to be very interested to see what actual transition plans are starting to look like and whether the companies can showcase best practice. The requirement to publish net zero transition plans is approaching. Some of the better companies, those that should be entering Finance for the Future, will have already got robust plans in place. Last year was more about how they were thinking about all of this; this year we might see more on how they’re actually going to deliver it.”
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Sustainability describes a world that thrives by maintaining its capital, whether natural, economic or social. Members in practice, in business and private individuals all have a role to play if sustainability goals are to be met. The work being undertaken by ICAEW in this area is to change behaviour to drive sustainable outcomes.
Finance for the Future excellence
The Finance for the Future awards programme is a partnership between ICAEW, A4S and Deloitte. The awards recognise and showcase high-quality examples of financial leadership. They're also about inspiring others, boosting ambition and building community by sharing knowledge and creating momentum for real change.
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