- Angeli Mehta
Interview: 'Boards have a fiduciary duty to protect planet Earth'
Angeli Mehta meets Philippe Joubert, founder of Earth on Board, which is leading a push to move boards away from a focus on short-term profits to creating long-term value for companies – and society
Philippe Joubert at the World Forum on Natural Capital in Edinburgh. Credit: Claire Poole
It just takes a few people to affect change; a few people to get the message out that business cannot keep making money at any price.
One of them is Philippe Joubert, founder of Earth on Board, a group of organisations, including ClientEarth, CDP, the B Team, We Mean Business and the World Business Council for Sustainable Development, whose aim is to move boards away from focusing on short-term profits, and to put sustainability first in order to build long-term value.
“We have to explain that we cannot continue like this,” he states. “Those who are not going to change are going to …. lose their leadership.”
And change begins in corporate boardrooms. Joubert argues it’s time to remind the men and women who sit on boards that it’s their responsibility to act in the interests of the company as a whole, not only its shareholders.
Joubert has been advising CEOs since he left the board of rail and power group Alstom in 2014. He started his career in banking – first in Brazil then on Wall Street – before moving to Alstom in Brazil. Just 13 years later he was on the group’s executive committee in France and president of its transmission and distribution business, before becoming the Alstom Group’s deputy chief executive in 2011.
Having been a CEO himself, he knows how crucial it is to get the support of the board. CEOs were telling him their boards weren’t asking about sustainability; they were only concerned about delivering short-term shareholder profit. It was apparent there was room to equip board members to ask the right questions to prepare for environmental and social risk.
He talks of an “earth-competent” board whose members understand sustainability, ask the right questions of management, and exercise their fiduciary duties. Part of this is a duty to respect nature, he says, “which is absolutely consistent with acting in the interest of the company they lead”.
The educational side of the programme is delivered through Cambridge University’s Institute for Sustainability Leadership. One of Earth on Board’s central themes is honesty. “You cannot have internal discussion of concern over sea level rise or extreme weather, and then externally say ‘it’s all fine’.”
Since the Paris climate change conference of 2015, boards cannot say they “didn’t know”, Joubert argues. Both business and governments were “inside the tent”, and made commitments on cutting CO2 emissions based on scientific fact.
The past two years, since Joubert set up Earth on Board, have been spent delivering seminars and making speeches; the task in 2018 is to harness all the interest that’s been generated.
Earth on Board wants to create a community of chairs and board members to exchange ideas and share best practice. Some of them will have gone through the Cambridge programme; others will have shared values. It’s that exchange amongst peers that he believes will drive change.
It’s time, Joubert asserts, to acknowledge the true value of nature, which means starting to calculate the environmental costs of producing a product. “If we don’t do this we’re distributing fake profits ..... .and paying fake bonuses and fake dividends.” The argument is that without accounting for nature’s services, we can’t know the real value of a company.
An obvious example is the oil and gas industry, which doesn’t account for either the damage it does in extracting resources, or for the work of nature in creating the resource in the first place: “When it comes to sending CO2 into the atmosphere, just because there is no carbon price does not mean there is no cost – the difference is we’re sending the bill to the next generation.”
“We take nature as unlimited and free of charge, but nature is sending signals.” Unfortunately, those signals aren’t always being interpreted with alarm: where ice caps are melting, some businesses see new routes for shipping, or opportunities for drilling.
“Don’t ask business to be altruistic, but they are basically realistic and they understand that they can’t operate profitably if the world is in chaos,” says Joubert.
The Global Footprint Network calculated that by 2 August last year we had already used up more than nature could regenerate in the entire year thanks to overfishing, cutting down forest and emitting more carbon dioxide than trees and oceans can absorb. This is dramatically earlier than even 10 years ago, when Earth Overshoot day was 26 October.
Joubert found that December’s One Planet summit in Paris was “very much in line with what we’re saying.” Both the board and financial markets are now recognised as important actors: “Governments understand that without finance you cannot have change at the right speed and the right scale.”
But companies and markets cannot bring about change alone. By 2019-20 Earth on Board’s goal is to influence the creation of better regulation, something that Joubert and his colleagues know how to do. He is chair of the Prince of Wales’ Corporate Leaders Group, which (amongst other things) holds discussions with policymakers around the world.
Joubert told the World Forum on Natural Capital in Edinburgh in November that governments needed to move a lot faster on regulation. “Clearly, it is a fallacy to think that the market can correct itself - and alone”.
Governments need to set credible long-term goals, within a stable policy framework and with the right price signals. Then, he argues, the market can harness its creativity and energy to work inside these rules and towards the goals set. Indeed, businesses can be more powerful than countries, since they have the power to scale up solutions very quickly.
Joubert points to the success of the RE100 programme, which now has 100 corporate members, from the US to China, all setting target dates to source 100% of their electricity from renewables.
In December, a group of RE100 companies asked for more demanding EU targets for renewable energy post-2020. When Joubert was heading up Alstom’s power and distribution business (between 2000 and 2011), renewables weren’t on the radar. “But in a few years, we have been able to transform the power generation sector. It is just a matter of will and bold action, because all the solutions already exist.”
The same surge will be seen, he predicts, with electric vehicles. This follows both the diesel emissions scandal, and the decisions – first by city mayors and then by national governments – to set targets for phasing out diesel engines.
City mayors and state governors have been in the driver’s seat because they are closest to the issues, such as health, that have spurred action to cut air pollution. Their leadership also means that President Trump’s decision to take the US out of the Paris climate change agreement will not do lasting damage, Joubert maintains.
“It will cost us time and money to replace US commitment, but we also have to thank him,” he adds, arguing that Trump’s actions and statements have mobilised opposition.
Where US money will be most missed is in Trump’s withdrawal of $3bn in funding for the Green Climate Fund, the UN programme that aims to help the countries least responsible for, yet most affected by, climate change.
Where the US is falling behind, others will push forward, most notably China. Who would have imagined that China is now leading action on climate change, Joubert asks.
He points to the journey China has made under the leadership of Xi Jinping, who acknowledged during his first term that China was built at the cost of nature. Then, at the start of his second term last October, Xi stated: “Only by observing the laws of nature can mankind avoid costly blunders in its exploitation. Any harm we inflict on nature will eventually return to haunt us. This is a reality we have to face.”
Joubert says that “reality” is encouraging cooperation to improve environmental law in China. NGO ClientEarth has been working with China’s supreme court judges to share knowledge and ideas about how to strengthen environmental legislation.
So Joubert is an optimist, albeit a worried one. Increasingly, we have the solutions to tackle climate change, he says, but decisions have to be taken to deploy those solutions. And that is in the gift of policy makers, and corporate boards.
“Are we not clever enough to understand that this is urgent?” he asks. “I don’t believe for one second that, having put someone on the moon, we cannot capture CO2 or stop plastic in the ocean.”
Article first published on Ethical Corporation