August 13, 2025
From Compliance to Competitiveness: How Boards Can Navigate Toward Climate Governance 2.0 in a Changing Landscape
By Sarah Keyes, FCPA, FCA, Partner, Sustainability Strategy & Transformation, PwC Canada
Climate Governance Needs a Reboot
In today’s rapidly evolving business landscape, climate governance is at a crossroads. While many companies have made strides in disclosing climate-related risks and opportunities, the pace and depth of transformation are falling short of what’s needed. Regulatory delays—such as the staggered implementation of ISSB-aligned standards and the CSA’s pause on mandatory climate disclosure rules for public companies—have created uncertainty. Yet, investor expectations persist (especially those in the EU) and customers are demanding more transparency and action on climate. Amidst a trade war with the US--our largest trading partner-- conversations about diversification need to consider that global trade is increasingly shaped by climate-aligned policies, like the EU’s Carbon Border Adjustment Mechanism.
At the same time, corporate net zero commitments are facing increasing scrutiny as many financial services companies depart from net zero alliances. Stakeholders—from investors to regulators—are asking tough questions about how companies plan to achieve their targets. In Canada, Bill C-59 introduces new provisions to address greenwashing, requiring companies to substantiate environmental claims with credible evidence. With 2030 fast approaching as a key interim milestone, Boards must ask Management: What is our plan to meet our GHG targets? How much will it cost? Is it feasible—or do our targets need to be reconsidered? These are not just technical questions; they are strategic imperatives that will shape competitiveness in a decarbonizing economy.
Boards have a leadership role to play
Boards can no longer afford to treat climate governance as a compliance exercise. The next frontier—Climate Governance 2.0—requires a shift from reactive disclosure to proactive strategy. It’s about embedding climate considerations into the core of business decision-making to drive long-term competitiveness.
Board members are uniquely positioned to lead this transformation. As stewards of long-term value, they have the authority and responsibility to ensure that climate risks and opportunities are integrated into corporate strategy, risk management, and performance metrics. Reporting is an output of a thoughtful strategy – not the other way around.
But leadership in this space requires more than oversight—it demands fluency and courageous leadership. Directors must be equipped to ask the right questions, challenge assumptions, and guide management toward bold, forward-looking action. This is not just about climate literacy; it’s about climate fluency in the context of business transformation.
Moving from Climate Governance 1.0 to Climate Governance 2.0
| Category | Climate Governance 1.0 | Climate Governance 2.0 |
| Governance | Focused on establishing the tone at the top and a formal Board responsibility for overseeing climate change | Building a culture where all employees, businesses, and functions understand their role in managing climate risks and opportunities |
| Strategy | Initial scenario analysis was largely qualitative, focusing on high-level directional impacts to business models | Deeper use of quantitative scenario analysis to understanding financial impacts across operations, value chains, and businesses, with a refined focus on materiality |
| Risk Management | Understanding how climate risks and opportunities could impact the company using ERM policies and processes as a framework | Establishing enhanced accountabilities for identifying and managing material climate risks throughout business units and functions, including supply chains |
| Metrics & Targets | Establishing baselines for GHG emissions (Scope 1, 2 and 3) and setting of corporate net zero and GHG reduction targets | Focus on meeting interim 2030 targets and actions needed to do so; Increased internal monitoring and reporting for decision-making using leading and lagging indicators to track progress toward targets |
3 Tips for Board members to initiate the Climate Governance 2.0 conversation
- Reframe the Conversation from Disclosure to Strategy
Shift the dialogue from “What do we need to disclose?” to “How does climate impact our business model, and how can we create value in a low-carbon economy?” This shift in mindset will send an important signal to Management teams that this is core to the Board’s oversight of strategy and risk management. - Integrate Climate into Core Committees
Ensure that climate considerations are embedded across all Board committees—not just a standalone ESG or Risk Committee. Audit, Governance and Compensation committees all have a role to play. Management teams need to understand how Boards are integrating climate into their governance structures to provide the right information to the right Committees. - Ask Management for a Transition Plan
Encourage management to develop a credible, financially grounded transition plan. This includes scenario analysis, capital allocation alignment, and clear accountability for delivery. As 2030 fast approaches, Boards should ensure they can articulate how the company is investing to achieve its targets- and that requires holding Management accountable to detailed transition plans.