Navigating Net Zero: a thought leadership series on climate risk, resilience and sustainability
The series follows on from Willis Towers Watson’s inaugural Climate Risk & Stewardship Summit in May this year, over 3,000 attendees across 3 days explored what the evolving stewardship role of financial institutions as the whole economy transitions to a net-zero and climate resilient future.
People are your greatest asset in tackling climate change. While strategy can set ambitious targets for a climate resilient future, culture, as the saying goes, eats strategy for breakfast.
This is because green strategies are not enough if the culture does not support and motivate implementation. Organisational inertia and a culture that shies away from innovation results in people and their skill sets becoming siloed and used ineffectively. Opportunities for breakthrough and to transfer learning and skills are missed. Data and other knowledge sources are left unharnessed, meaning solutions fall short and are not informed as they should be. In some cases, strategies can be misunderstood.
As Matt Scott talks about in his article opening this series, a climate resilient economy is one that requires stewardship – a collective cultural shift to managing climate risk across the whole economy.
That is why we explored the power of culture at Willis Towers Watson’s Climate Risk & Financial Stewardship Summit earlier this year.
Only culture, rather than strategy, can match the complex challenges of climate change. But where exactly do we need to see cultural change in organisations to make sure we act effectively on climate? And to what extent can culture help organisations along the path to becoming truly sustainable?
Culture is the collective influence of shared values and beliefs on the way an organisation thinks and behaves
Culture isn’t just about the number of exclamation marks people think is acceptable to include in an email, or the culture of working long or perhaps flexible hours. Culture is the collective influence of shared values and beliefs on the way an organisation thinks and behaves which is influenced by leadership actions at all levels in the organisation. Culture can determine how a group collectively understands a problem, how they work together to create solutions, and respond to change over time. Therefore, a culture that is effective for addressing climate needs to soak through to every aspect of how an organisation operates. Firstly, an organisation needs to see their culture reflected in their purpose. When a mission is clearly defined, the tone of your approach and response – your culture – will be set. A strong people and teamwork ethos is also needed to achieve that purpose and promote collective responsibility and belonging. Transparency with stakeholders helps to avoid ‘greenwashing’, opens up opportunities for learning from them, and helps match what you say with what you do.
Nurturing integrity and authenticity displays high ethical standards and provides the evidence that you are not just trying to gain competitive advantage.
At the Thinking Ahead Institute, a global not-for-profit group that Willis Towers Watson helped to establish, we have seen that culture in fact provides competitive edge. We have helped many investment organisations develop roadmaps to shape their culture and sustain their goals. This involves creating new language around culture as well as identifying how it can be managed and objectively measured.
Through research into understanding culture, we have identified emerging connections in how culture can help organisations along the path to becoming truly sustainable, specifically by helping address structural gaps:
We are phenomenally good at generating a lot of data. Yet bigger and better data is not translating into enhanced insights or improved decisions on sustainability. The real data challenge is how to evolve highly imperfect ESG data sources into decision-useful information. During a panel session at the Summit, Wendy Cromwell, Vice Chair and Director of Sustainable Investment at Wellington Management notes: “We wanted to bridge that gap between climate science and finance. The scientists [didn’t] know basis points, but [investors] didn’t know Representative Concentration Pathways. Working together [with Woodwell Climate Research Centre] helped us to build some climate knowledge from the ground up with our investors and a belief that physical climate risk was all around and intensifying, the transition was happening and unlikely to reverse.”
The real challenge is how to evolve highly imperfect ESG data sources into decision-useful information
With long time horizons, uncertainties, and inherent interconnectivity, any effective response to the complex challenge climate change presents requires multiple insights. Therefore, building teams that are capable of delivering exceptional results – or superteams – has become more critical than ever. Led to success through combining diverse and exceptional talent, these teams’ collective intelligence is fully leveraged by great culture and governance. This collaborative culture may require staff to gain new skills, or have dormant skills put to work. Sven Slavenburg, Head of Global Rewards at Philips, explains that a mix of skills sparks and motivates their technological innovation. For example, colleagues may rise to the challenge of building sustainable options, such as products for the circular economy, but a new challenge then emerges in how to sell them and buy those products back. This requires new skills in developing longer-term relationships with clients and to help shape and understand expectations.
Building teams that are capable of delivering exceptional results has become more critical than ever
just as sourcing skills is important for addressing climate change, so is collaboration – including between and within organisations. Many organisations admit to operating in silos across regions and teams. Collaboration gaps stifle innovation and prevent delivering a more joined-up, holistic, and teamwork-oriented approach to sustainability. Progressive boards are therefore looking for how collaboration can produce better outcomes and reduce gaps in their thinking. For example, the Government Pension Investment Fund of Japan (GPIF), the world’s largest asset owner, made it their mission to build strategic partnerships and collaborate with agents across the chain, including asset managers, other asset owners, and by lending their voice to support NGOs. As a result, amongst giving awards to companies who published excellent integrated reports, and shifting the relational culture to one of ‘engaging’ with asset managers rather than just ‘monitoring’ them, the GPIF has encouraged others to share best practice knowledge with other pension funds through the Global Asset Owners Forum, which they founded with CalPERS and CalSTRS.
Purpose is now playing a larger role in driving the direction of growth and stakeholder engagement. It can deliver greater traction and trust from clients, as well as acting as a catalyst for stronger culture. Exploring organisational purpose not only helps to reveal drivers and motivations, but also how stakeholders rank and inter-connect, helping to identify how relationships reflect purpose and culture too. Purpose sets the tone for the workforce, with employees increasingly drawn to organisations that are purposeful and show social responsibility. Ben Pincombe, Head of Stewardship at UN PRI, has noticed that investors are paying more attention to the types of incentives they offer. If structured appropriately, incentives can increase firm value, refocus efforts away from short-term targets, and create better accountability on performance too. Similarly, Ben has seen how investors are setting out clear expectations using stewardship policies, with these expectations becoming increasingly specific in regard to climate change action.
Having a strong culture that is effective in achieving your purpose will help to identify and put in place the right incentives to motivate and sustain action. A culture of teamwork and transparency will help to cultivate the needed skill sets to address the correct problems, and facilitate spaces for collaboration. From this, respect and innovation can grow, enabling the mindset change needed to prioritise efforts and set the tone and standard for how we do things. Culture has the capacity to match the challenge of climate change. Do you have it?