The global mean temperature for the twelve months from February 2023 to January 2024 was the highest on record. At 1.52°C above the 1850 - 1900 pre-industrial average, it already exceeds the legally binding 2015 Paris Agreement target limit of 1.5°C. Further increases are in the pipeline and are expected to occur. Hitherto, inadequate individual, corporate, and collective responses and unsustainable consumer aspirations, collective lifestyles, and growth ambitions suggest global warming and its consequences may soon become unstoppable. Corporate boards are running out of road in which to confront realities, review, reinvent, and/or change direction, and act more decisively before it is too late.
There are multiple possible reasons for inadequate or inappropriate action. Some directors feel disconnected from general trends, conflicts in distant places, and crises affecting people for whom they feel others are or should be responsible. They do not want to be distracted by events and/or developments that they feel they cannot control. Others recognise the limits of corporate capabilities, but they also understand the potential they might have to influence opinions and instigate wider cooperation. They look for areas of opportunity to help others cope, respond, or recover, including collaboration and collective action.
With urgent matters to address, boards sometimes put looming issues such as global warming on the 'to do' rather than the 'action now' list.
Discounting future impacts and looking beneath the surface
Uncertainty, unwelcome and/or unexpected events, relentless innovation, and confronting a variety of challenges have long been a perennial feature of life as a director. With urgent matters to address, boards sometimes put looming issues such as global warming on the 'to do' rather than 'action now' list. Directors who may give serious consideration to their own financial planning and preparation for eventual retirement sometimes devote far less attention to the future health of the planet and its ecosystems and the climatic conditions their grandchildren might experience. Future impacts are often so heavily discounted that they fail to influence contemporary decisions to the extent that they should.
While privately recognising that 'business as usual' may not be an environmentally or socially responsible option, those who benefit from existing activities with negative externalities often act to protect and/or prolong them. Evidence and considerations that might weaken the case for a preferred course of action are often ignored and/or withheld. Directors, and especially independent directors, should take little for granted. A healthy skepticism is required in some corporate boardrooms. Groupthink, misinformation, and exaggerated and polarised views abound. Critical thinking is essential for a critical friend. Directors should question and probe. The purpose of reports, the assumptions on which they are based, and the self and/or vested interests of their authors should be explored.
Followers may go with the flow. Leaders and entrepreneurs look for signs that others ignore. The numbers might look good or seem bearable, but an average could conceal significant variation, with certain locations or contexts being especially badly hit by a development or general trend. The right question can sometimes flush out areas that need attention and/or possible opportunities. When considering and prioritising risks, many people focus on those that are most likely to occur. Lower probability but higher impact risks may be ignored and be difficult to handle when they crystallise, if, by then, needed resources are already devoted to more likely risks with less impact that were judged easier to manage.
Questioning and discounting technology expectations
Many directors have experienced technology projects and investments that were 'oversold' and did not deliver. While the beneficial potential of some technologies may sometimes be missed, the prospects of many others are often hyped, especially by their vendors and executives keen to add working with them to their CVs. The promise of an emerging technology may also be exaggerated to delay a decision, such as one to stop polluting activities. Rather than grasping nettles, defenders of current operations and activities play the suggested contribution of a yet to be fully tested technology as a 'get out of jail' card. Directors should be alert to such defensive strategies.
Unproven and expensive technological solutions may be proposed by 'delayers' as alternatives to much needed and more certain impact steps to cut carbon emissions. Examples of rearguard actions include the reluctance prior to COP 28 to agree to transition away from fossil fuels and the playing up of the prospects of certain technologies, such as carbon capture and storage (CCS), to justify allowing fossil fuel extraction and use to continue. CCS projects often fail to reach their targets, and additional energy is required to power them. Using immature technology to delay change can expose us to climate impacts, the costs of which may be underestimated.
Briefings to boards may be protective and confirmatory, not balanced or complete. According to the report of a conference of the Royal Society in London, estimates of the economic consequences of climate change received by key decision makers can miss the full impacts of extreme weather events and the potential for cascading risks and triggering tipping points. Participants concluded that climate change impacts on nature, natural capital, and human health may be overlooked or ignored if the focus is on narrow economic consequences rather than adaptation, social, and wider considerations.
Coping with polarisation, misrepresentation and disinformation
Directors should check the sources of reports. They may deal with symptoms, conceal drivers, or obscure root causes. The increased use of social media and declining trust have been accompanied in some countries by polarisation and the growth of extremist views. Outrageous claims make headlines. They can become more believable after multiple repetition. Busy followers might not have the time to delve deeper into more balanced analyses. Media may find it cheaper to provide strong opinions that reinforce existing tribal beliefs, rather than investigate issues from multiple perspectives.
Algorithms identify the leanings and preferences of viewers and followers and feed further content that entrench them. Directors should think for themselves and exercise individual judgements rather than 'follow the herd'. What they encounter may be misrepresentation or disinformation when it is known to be inaccurate and intentionally provided. Both and deepfakes can target and strengthen existing biases. Designed to appeal to emotions, they present a particular view of issues, may set out to undermine and discredit those who think differently, and can lead to the further fragmentation and polarisation of views of the world and current issues.
Instigators can be concealed and malevolent. Fake news, including that targeting a company and about global risks, trends and existential threats, can easily be spread. Directors and boards need to understand their individual and collective biases, identify where they might be vulnerable, and be alert to groupthink that may not coincide with reality or what is required. Misinformation and disinformation complicate evidence based reasoning. Corporate and other slogans can also oversimplify complex issues and mislead. Board members should explore aims and intentions, and filter polarised views.
Disaggregating data and discerning meaning
Many company directors are regularly exposed to opinions, claims and counterclaims, misinformation and disinformation, and contending versions of reality propounded by a diversity of sources and motivated by self and vested interests or hostile intent. Aggregate information they receive in areas such as growth and employment can conceal considerable diversity in its underlying components. Reports that cover global trends may include national figures or league tables to aid comparisons. Media and political discussions are often at national levels. Local, sectoral, corporate differences and impacts can be overlooked.
Directors are expected to adopt a helicopter perspective and see the big picture. They also have duties and responsibilities relating to the companies on whose boards they sit. These are likely to operate in certain sectors and locations and be at a particular stage in their development. Overall trends, averages, and generalisations may not apply to their situation and circumstances and/or the specific challenges and opportunities they face. While expected to be aware of broader trends and developments in the contexts in which they operate and general views about the potential contributions of emerging technologies, directors should also look ahead and provide strategic direction in particular situations.
Assessments such as those of emerging technologies may reflect the perspectives of those who propound them. In some cases, views about them may be increasingly polarised. For those who sell them, offer consultancy services based upon them, or seek investment to further develop them, emerging technologies are usually por trayed as potentially transformational. Those who could be disadvantaged by them may portray them as a possible danger or threat. Proponents of viewpoints often use selective data, examples, or opinions to support their case. Assessments undertaken by directors should be balanced and reflect choices and the possible existence of multiple benefits and various drawbacks.
Balancing micro and macro considerations
While aware of macro discussions and debates, directors and boards should consider what is possible, desirable, and responsible. The strategic direction they provide should relate to the impacts of an external trend or emerging technology upon the operations and activities of one or more individual companies and their stakeholders, some of whom may be especially dependent upon them and possible responses. Boards operate against the background of a fragmented world, widespread misinformation and disinformation, growing polarisation, and sources of information that may be biased and are likely to be incomplete, especially in relation to negative externalities and impacts on nature and future generations.
The impacts of a general trend such as climate change and what needs to be done in response to ensure a sustainable future, or of applications of an emerging technology such as AI, are unlikely to affect all people, organisations, and communities in the same way. While many, if not most, may experience some inconvenience, others in locations vulnerable to fire, flood, inundation, or drought and sectors associated with fossil fuels may be severely impacted. Differing short and long term winners and losers will emerge, depending upon their agility, openness to opportunities and new possibilities, willingness to adapt, reskill, and innovate, and entrepreneurial and collaborative responses. Discussions about national policies and responses sometimes overlook the extent of this local diversity of impacts and vulnerability.
Some areas and locations might be affected more than others by required transitions, necessary transformations, and collective responses to trends such as global warming. For example, a transition away from fossil fuels may lead to high local unemployment, while reskilling and/or redeployment might depend on available alternatives, infrastructure, and resources, as well as the ability and capacity of community, regional, and national authorities to cope. The costs and benefits of changes may be unequally shared. Social and economic support, the affordability of a minimum basic income and other measures, and responses to mass migrations can also vary and reflect an area's resilience and stage of development.
Handling conflicting expectations and differing consequences
When disaggregating data and distinguishing between micro and macro considerations, one area in which expectations may differ is the impact of both technology and existential threats such as climate change upon future work and employment. In addition to mandatory requirements such as labour and employment law, and health and safety legislation, there may be areas in which directors and boards can determine what their responsibilities should be. These could include extreme weather events to which they and the communities affected might need to respond. Some sectors and locations may be impacted much more than others.
General trends, overall figures, and averages often conceal wide variations in how different sectors, business units, occupational groups, locations, and communities experience the net costs and benefits of developments. What is inconvenient or beneficial for some could be disastrous for others. Expectations for innovations and technologies can be both positive and negative. AI and automation can impact individual tasks and whole jobs, create new possibilities, enable more productive combinations of people and technology, and enhance the experience and roles of some people while replacing others. Past waves of technological innovation have initially benefited an 'advantaged few' rather than 'the many'.
Less developed communities and societies that lack the skills and infrastructure to reap the positive benefits of AI may suffer disproportionately from job displacement. The vulnerable and marginalised can also be the first to experience the consequences of climate change. The impacts of responses to global warming required to ensure our collective survival, such as shutting down fossil fuel related operations, are also likely to be traumatic for affected local families, businesses, and communities as incomes are lost. Replacement activities, volunteering, and funding for adaptation, reskilling, relocation, and various infrastructure and transition tasks may be needed if order is to be maintained and migration avoided.
Embracing positive possibilities while addressing negative impacts
Rather than a simplistic choice between whether the overall impact of a trend or development might be positive or negative, directors often have to embrace potentially beneficial applications of technology and also address negative implications for those for whom they are or feel responsible. Whether an application of technology helps or harms us depends on how it is used, for what purpose, and the extent to which it is monitored and controlled. How and whom it affects can also reflect individual, corporate, and collective responses to its adoption and use.
Applications of AI could be used to enhance the performance of some tasks and enable new ones to be undertaken, or to reduce the requirement for people and lower costs. The net effect could be changes in the quantity and quality of work and the level and nature of employment, with adverse consequences for the lower skilled and areas or communities with limited infrastructure. The overall impacts of technological developments and existential threats such as global warming on employment and work will again differ according to sector, activity, and location, as well as how affected organisations and communities individually and/or collectively collaborate in areas such as reskilling and infrastructure development.
Directorial responsibilities relate to the companies on whose boards directors sit. In relation to future work and employment, there may be both positive possibilities and negative impacts to consider. What could and should be done to help those at risk from technological developments, existential threats, and/or sustainability imperatives prepare and cope? Could local and/or community collaborations and collective responses provide the required skills and infrastructure and tackle the necessary resilience and transition tasks? How might boards influence community and societal funding of needed adaptation, voluntary or remunerated activities, or minimum income support for those who are or become unemployed?
Initiating mutually beneficial collaborations
Previous assumptions, experiences, and practices are not always the best guides to future action. Aspirations and expectations based upon them may be misleading and not relate to the scale and nature of collaborations sought and the multiple and collective responses and transitions now required. Discontinuities can also occur in trends. Many aspects of current developments, challenges, opportunities, risks, and threats are rapidly evolving, as are the business, operating, and transition models required. Influencing or moderating factors can also change. For example, resilience requirements may differ, and recovery from certain situations might take longer at higher temperatures.
Responsible leaders confront realities. Boards should ensure that corporate priorities reflect what is needed to increase the resilience of stakeholders, responsibly cope with the major challenges, risks, and threats they face, and quickly embrace the most promising opportunities to successfully respond. Resilience requires fast and flexible action and reactions. False starts, dead ends, distractions, and wasted effort must be avoided. They erode hope and trust. Speed is of the essence. It may be more important than cost and might require governance changes. Access to evolving capabilities through living collaborations, as and when needed during transition and transformation journeys, can be more important than their ownership.
Some boards may need to focus more on outcomes sought in situations and contexts they can influence with their available capabilities and connections. Risk assessments should include the likely exponential costs of inaction, not adopting new technologies, or delaying responses. Collaboration with complementary players can lead to synergistic benefits, economies of scale, needed skills, quicker adaptation, and faster rollouts. Potential partners should be chosen with care to avoid those who move too slowly, focus on avoiding downsides rather than increasing benefits, or take out more than they put in. Involving them earlier to discuss options, explore future possibilities, and identify alignment and compatibility issues can help clarify choices and trade offs and may lead to earlymover and collaborative advantage.
Director-General of IOD India for UK and Europe operations
Prof. (Dr) Colin Coulson-Thomas, President of the Institute of Management Services and Director-General of IOD India for UK and Europe operations. He has advised directors and boards in over 40 countries.
Owned by: Institute of Directors, India
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Director-General of IOD India for UK and Europe operations
Prof. (Dr) Colin Coulson-Thomas, President of the Institute of Management Services and Director-General of IOD India for UK and Europe operations. He has advised directors and boards in over 40 countries.
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