Director Spotlight – Judy Cotte

Judy Cotte
Director, Gibson Energy, Powerschool Holdings Inc.; Member, ESG Advisory Council, EDC; Managing Director, Head of ESG, Onex Corporation

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 Judy Cotte on what directors prioritize regarding climate issues as we head into 2024 and how boardrooms can more effectively communicate their climate change strategies and progress to shareholders and other stakeholders.

Looking back, 2023 has been an active year in sustainability developments, both globally and within Canada.  What do you see boards prioritizing is terms of climate issues as we head into 2024?

The level of focus on climate-related issues, as well as how those issues are prioritised, will very much depend on the industry in which the company operates. For companies in (or adjacent to) high emitting sectors, I think there will be a continued focus on several areas including:

• ensuring the quality of emissions data and disclosure, including material Scope 3 categories, particularly as the ISSB Standards progress towards becoming integrated into public companies’ reporting obligations in Canada and other jurisdictions;
• identifying and allocating capital towards cost-effective, actionable opportunities to lower GHG emissions throughout the company’s operations;
• staying on top of emerging global investor priorities for climate-related data and analysis, as they are continuing to evolve, quite apart from any legal or regulatory requirements.

How do you believe boards can more effectively communicate their climate change strategies and progress to shareholders and other stakeholders, to help foster greater transparency and trust?

Expectations regarding climate-related disclosures are certainly increasing, particularly for public companies in high emitting sectors.  Most voluntary sustainability reports for companies in those sectors already have a significant focus on climate, including comprehensive GHG emissions data and the company’s overall approach to reducing emissions.  However, there is an increasing desire for more detailed disclosure of how companies are addressing specific climate issues that are material to their business and how companies are integrating those issues into their overall corporate strategy.

For example, public companies that have set a net zero by 2050 goal will often disclose their overall strategy to achieve that goal, including medium term targets to assess progress.  Over time, it will be important for companies to continue to disclose their progress against any disclosed targets, but also any challenges that they are encountering.  For example, not all decarbonization initiatives will represent the best or most efficient use of capital and some may be dependent on technology that is either untested, not feasible for a particular site, or not cost-effective.  Being transparent about those challenges, while continuing to look for ways to address them, will help to ensure that stakeholders’ expectations are informed and realistic.

Additionally, where relevant, it is important for public companies to disclose their approach to climate change-related issues that go beyond GHG emissions.  For example, some companies may face potential disruptions to their operations or supply chains due to physical climate-related risks or may find their business model challenged due to changes associated with the transition to a lower carbon economy.  Companies that effectively communicate their strategies to identify and address those broader strategic and operational risks are most likely to continue to earn the trust and support of their shareholders and broader stakeholders.

What strategies or advice can you share to ensure that climate change is consistently on a board's agenda and that discussions remain proactive and forward-looking rather than reactive?

Many boards, particularly those in high-emitting sectors, will designate one committee of the board (often a Sustainability/ESG Committee) to have primary responsibility for proactively identifying climate change-related issues that may have a material impact on the company’s business.  However, to ensure that those issues are consistently on the board’s agenda, it is important to effectively integrate any material climate issues into the board’s regular board reporting and oversight processes.

For example, material climate-related risks should be integrated into the regular risk reports provided to the audit committee (or whichever committee has primary responsibility for risk oversight), potential decarbonization projects should be considered as part of the annual operating plan approval and capital allocation process, and business development/strategic plans should consider any material climate-related opportunities for the business.  Integrating material climate issues throughout the board’s committees and regular agenda items will help to ensure that the board is applying a climate lens to its oversight function.  Importantly, integrating relevant and potentially material climate-related issues throughout the information provided to each committee and to the full board will also ensure that climate issues are considered in context rather than in isolation, so that each director understands how climate-related issues may impact different aspects of a company’s business.