January 10, 2023

Directors' Spotlight: Wendy Kei

Head and shoulders image of Wendy Kei

Chair, Ontario Power Generation; Director, Centerra Gold Inc., NFI Group Inc.

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 Wendy Kei, Corporate Director, on top challenges boards face as they set their path to net-zero, what boards needs to consider as they develop their transition road map, and new opportunities for organizations after COP27. 

What is the greatest challenge for Canadian boardrooms in dealing with the transition to net zero? Are challenges more externally or internally driven? 

The greatest challenge for Canadian boardrooms is obtaining buy-in from all stakeholders on the need for change now, not in 2050. The transition to net zero will require consensus from the entire board and management. The economics for this transition might be tough once an assessment has been completed. Determining the pace at which a company will seek to decarbonize – absorbing costs, impacts to financials, impacts to share price and market position compared to peers – are significant considerations. External and internal challenges will depend on the company and its industry. For example, the oil and gas industry will need to decarbonize across production and value chains, whereas other industries, such as manufacturing, are primary consumers of energy.  

Boards are now engaging in difficult and complex conversations as they consider alternative options in their transition roadmap. What are some important questions directors need to ask to ensure their transition plan is the right one for their organization? How might their industry or sector influence this outcome? 

The first step of any company’s transition to net zero is to compare and contrast the pathway options with peers, striving for best practices. Certain industries are joining forces, like the oil and gas industry and its Pathways Alliance initiative. As part of their conversations, boards need to remain focused on issues that are most material to transitional risk, which can be driven by industry expectations and external stakeholders. How a company responds to the net-zero challenge depends on where the organization falls on the energy transition spectrum – for example, producer, consumer, or both.  

Important questions that directors need to ask include: Where does the responsibility of climate change reside? Does this lie with the full board, on a certain committee or between several committees? How does the board keep up with the fast-paced changes related to climate change? What continuing education or training programs are available?  

With COP27 now complete, many sectors will be assessing their progress in their transition plans. What can boards do in their oversight role to ensure their organizations properly assess new opportunities as part of their ongoing climate change strategy conversation?   

Boards should be embedding climate change and the integration of interim targets into their strategic planning process. Companies will need to ensure that climate-related risks and opportunities are an integral part of their internal decision-making and capital allocation processes. Interim targets help bring the long-term objectives of net zero by 2050 into near-term focus for directors so they can effectively oversee the progress toward their goals. Boards should seek to directly link executive and management compensation to the company’s climate change strategy performance.  

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