The most recent global energy shock is highlighting how important, and how hard, a well-managed transition to net-zero will be. While company engagement on climate change is rapidly evolving, new research has found that not enough companies are prioritizing tangible greenhouse gas (GHG) reduction commitments or aligning future capital expenditure with these targets.

One critical reason, the research highlights, could be that their boards do not have the composition or practices to provide the oversight needed to put climate at the center of strategic planning.

Conducted by the nonprofit BoardReady (Raji is an adviser) and sustainability consultancy A Bird’s Eye View (Helena is a principal), the research assessed data from 159 global companies identified by Climate Action 100+ as the largest corporate GHG emitters against the initiative’s net-zero benchmark indicators and their board’s composition. It found a positive correlation between more gender-diverse boards and company action across eight of the nine indicators.

To minimize volatility as they decarbonize their value chains, businesses need to act on climate change with greater conviction. Some companies are, but many companies are not. Those that are acting have more gender- and age-diverse boards, the study found, and are potentially better positioned to make the transition to net zero.

The lack of action by companies puts them at odds with governments pushing the responsibility of transforming the economy onto businesses’ shoulders. The findings suggest some of the most important companies in the world are not ready to respond.

While 80 percent of the global companies assessed have or will implement the Task Force on Climate-Related Financial Disclosures recommendations, and over 50 percent have made some level of commitment to net-zero GHG emissions by 2050, only 4 percent have disclosed future capital allocation plans aligned with their reduction targets. Interestingly, the gap between awareness and action narrows significantly with companies where at least 30 percent board seats are held by women.

The evidence shows a lack of urgency. Companies are disclosing more long-view thinking but not enough in the short term. In contrast, companies with more gender-diverse boards are more advanced in their disclosure decision-making on climate action. They are twice as likely to have committed to net-zero GHG emissions by 2050, and 25 percent more likely to have medium- and long-term GHG reduction targets compared to less-gender-diverse boards. They are also twice as likely to have developed a decarbonization strategy or to have allocated future capital expenditure aligned to these targets.

Read the full article about board diversity by Helena Wayth and Rajalakshmi Subramanian at GreenBiz.