September 12, 2023

Director Spotlight - Jo Mark Zurel

Jo Mark Zurel, ICD.D, FCA
Chair, Fortis Inc; Director, Major Drilling, Highland Copper, Sustainable Development Technology Canada

Director Spotlight is a regular feature that provides an opportunity for a prominent director to discuss practical insights and critical developments on climate governance important for boardrooms. Chapter Zero Canada recently spoke with Jo Mark Zurel on how boards are integrating recent weather-related events in Canada into their risk assessment oversight and long-term strategic planning, and how boards are preparing for the adoption in Canada of recently released climate sustainability standards from the IFRS.

Over the past year, we have seen multiple weather events impacting organizations’ operations and workforces across Canada.  How are boards ensuring these evolving climate risks (and opportunities) are fully integrated into the company's, risk assessment, long-term strategy, and decision-making processes?  Do you have any examples you could share?

The energy industry is transforming, and at Fortis, we are focused on investing capital in clean energy, resiliency, and modernization so we can deliver more renewable energy to customers reliably and safely, with infrastructure that can operate in more extreme weather conditions. Utilities have always incorporated climate patterns and weather events into capital plans to ensure reliable customer service, but with the dramatic increase in extreme weather events, the board has done deep dives on the impact and mitigation activity, to ensure that we understand the impact on our company. Historically, we have looked to the past to inform decisions related to climate and weather. Now, we look to the future and new climate science models to ensure we have an energy delivery system built to withstand climate change’s impacts. The Fortis board is actively engaged as the company implements this shift.

The Fortis board is responsible for understanding the material risks of our business and the mitigation strategies to ensure we achieve our strategic objectives. Climate-related matters are discussed regularly as part of board strategy sessions. The Governance and Sustainability Committee assists the board in overseeing our governance practices as well as our sustainability commitments. In addition, Climate related measures have been introduced to executive compensation.

At Major Drilling, the full board is responsible for climate-related issues, including among other things, overall strategy for climate risk and GHG emissions and considerations regarding potential targets and goals. The Corporate Governance and Nominating Committee exercises a coordinating role for assignment of ESG-related initiatives to the various board committees and engages with management on broader climate reporting matters including the identification and application of relevant climate-related disclosure frameworks. The Environment, Health and Safety Committee has specific oversight responsibility for making recommendations to the board regarding GHG emission target setting and monitoring progress on the company’s Decarbonization Action Plan.

Given the recent issuance of ISSB (IFRS) S1 and S2 Sustainability Standards, providing transparent and comprehensive reporting will be critical for stakeholders going forward. What should boards be doing now to ensure management has all the systems and processes in place to ensure they will be meeting regulatory climate and sustainability requirements once these are adopted within Canada?  What questions should boards be asking?

Education is key. Climate change is a new and evolving area, so board education is very important to ensure they are equipped with the knowledge and skills to be effective. Boards need to think about climate and sustainability reporting the way they think about financial reporting.  This includes establishing the governance structure. If oversight is shared between board committees, ensure this is clearly understood and documented. Second, map out a plan, make incremental progress and hold management accountable.

A few suggestions for boards as they prepare to ask questions of management:

  • What are management’s processes for assessing and managing climate-related risks and opportunities? Does the board have adequate oversight of these risks and opportunities?
  • What is management’s approach to determining materiality? This is a core component of the ISSB standards, and companies are conducting assessments to determine the materiality of Climate-related risks and opportunities.
  • What are the internal controls over climate related disclosures? Companies should begin to evaluate their internal systems and processes for collecting and validating sustainability information and data. The intention is to have ISSB standards auditable, so it is important for the data to have the proper systems and controls.

Overall, the release of the Sustainability Standards is a welcome development, bringing consistency to the unwieldy array of reporting standards and bodies that have existed to date. What remains to be seen is the final form of the standards that will be adopted in Canada. That said, boards need to ensure that their companies are getting the broader systems in place now to meet the demands that are coming.

Stakeholders are paying closer attention to a board’s sustainability knowledge and experience as transition plans are incorporated into long-term strategies.  What advice would you give boardrooms looking to ensure they have the required skills and competencies as climate-related issues get more scrutinized, grow in complexity, and become more visible?

First, don’t panic. Climate change is a fairly new expertise, so attracting board members with direct climate experience can be difficult. As a result, it is important for current board members to obtain that expertise through education; many board education programs are available.

At both Fortis and Major Drilling, board members are surveyed on their director education priorities and management delivers regular, high-quality sessions from internal and external presenters. Attending climate change training programs offered by the ICD and others should be encouraged and supported as part of the company’s governance policies.

One of the keys to success has been regular board and senior management training delivered by trusted external consultants. While part of this training should be geared toward providing an overview of broader trends and best practices, there should also be a strong focus on practical advice, rooted in a company’s specific operational realities, that’s aimed at achieving the greatest impact and focusing on what’s most important to achieving the company’s purpose.

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