Are Boards Ready for the 4th Industrial Revolution & ESG Governance?

Discover how the convergence of digital, physical, and biological technologies in the 4th Industrial Revolution is reshaping business landscapes and why prioritising ESG practices is crucial for sustainable growth.

Learn from industry leaders Sharon Constançon and Rhona Morrell as they share insights on navigating these transformative changes and unlocking long-term value.

Listen to the webinar replay to stay ahead in this dynamic era.

Key Take Aways:

Opportunities:

Challenges:

The 4th Industrial Revolution represents the current era of technological advancement, characterised by a fusion of digital, physical, and biological technologies.

In this ever-changing business landscape, how can organisations and their boards thrive and how do they navigate the evolving legislative framework around the 4th Industrial Revolution and ESG?

Transcript

Introduction - Sustainability and ESG Elements in Business

SC: Good morning to all of you who have joined us, depending on where you are in the world. It’s morning, midday, one o’clock in the UK, so good afternoon to those who are joining us from the UK.

Thank you very much for being present. I am Sharon Constançon, I’m CEO of Genius Boards and Genius Methods. We are a consulting company in the board evaluation, board development and board training space.

Let me introduce my guest, Rhona Morrell. I love her description of herself. She calls herself Chief Change and Planet Officer, which is who she is to her customers. She is the Chief Executive of iReGen, an organisation and a person who is absolutely passionate about the sustainability of the business, the sustainability of our planet, the ESG elements, our environment, and climate change.

There are many, many areas that Rhona is very, very passionate about; you’ll soon see and share the passion with her as well as the things that are important to her. What we want to get across to you today in this webinar is to make sure that you understand, as a board, that you actually can make a difference. It’s not difficult to make a difference. We all have to take responsibility to ensure we are making a difference. One, because our customers expect it, our staff expect it, our investors expect it.

All our stakeholders expect us to consider long-term sustainability. Not only is it good governance, but it’s also actually good business.

To start with Rhona, it might be helpful if you could introduce yourself. Tell us a little bit about your journey. It’s been really fascinating hearing who you are today, where you come from, and why this is your passion today.

RM: Thank you so much, Sharon, thank you for the introduction and having me here today. A virtual hello to everybody on the webinar today.

As Sharon mentioned, my name is Rhona. I live and work in the UK. I actually started my career way back when, with big brands like Red Bull. I worked in FMCG companies – fast moving consumer goods companies, and I worked my way up to sort of board level. So, I’ve sat where you’re sat essentially, as an entertainment and sports director within the NEC group – and it was during that time and over 15 to 20 years of work that I realised, through traveling, through doing philanthropic work, that there was a lot more going on.

Having come from a brand, like Red Bull where we were risk takers. Culture was really important and understanding your stakeholders was at the heart of everything we did. I guess in a way, I just assumed everyone was like that. Fast forward sort of 15 years and having worked in commercial, marketing, innovation, supply chain, I’d really started to get a really good understanding of the bigger picture of business, but burning all the way along through every trip with the family or scratching the surface of what was going on around me. It soon became very apparent that the way we are transitioning as a world both through the 4th Industrial Revolution, but also through sustainability, that for me, it was a no brainer.

Once I knew the facts, then essentially, I kind of had to reinvent if you like and kind of study in this area. So, yes, I’ve been working in this space for about seven years now.  I studied at Cambridge, I’ve read far too many books, but in terms of me today, I’m a trust mentor. I’m also on the board of trustees for Education Africa. My day job, if you like, is essentially advising educating and empowering people, from SMEs to corporations on these very topics.

I’ve got a couple of really wonderful global initiatives, the Water Initiative in India, a jungle restoration project in Panama and a natural fertilizer project in America.

So alongside doing workshops in this space, I love doing these sessions because it allows that interaction and myth busting and kind of giving you that knowledge and the facts to really hopefully empower you to act at the end of it. So, thank you Sharon for having me.

RM: A great question. I look at the longevity of someone, often as a pop artist; if you can continuously learn and reinvent and move with the times, then I think there’s no problem. If you’ve been there nine years, I think it’s just whether you’re still doing it; I did a recent post recently about how women were told and taught home economics, and honestly, I nearly fell off my chair when I looked at that kind of standard. But essentially, a lot of boards are still working in very traditional economic models and patterns, etc. So, longevity is not always a bad thing.

For me, it breeds consistency. It can also show a real good bond with its stakeholders around trust because trust is absolutely essential. However, I think a fit, you know, a fit for the future, fit for purpose board, essentially nowadays, has to be able to recognise not only that the board has to move in terms of diversity and inclusion but also that they’re going to set carbon Net Zero targets.

The challenge I think that boards have today is that very, very few recognise the accountability for sustainability; for example, there’s only about 2% of boards actually have the correct literacy or expertise in that area. And that’s not through necessary negligence, or we’re not bothered, but it’s actually such a huge topic. So, we’ve shifted from global warming to climate change. 

The way I like to talk about it and empower people is more around systems change and sustainability. And I’d love everybody in this call to recognise that there are 17 Sustainable Development Goals, and within that, just under 300 objectives of where you can act and influence. Now, I appreciate that might even still seem very, very overwhelming, but the fact that we’re not encouraging boards, and we’re not giving them the literacy and the training that’s required, we’re then relying on maybe misinformation or lack of knowledge. And that’s, therefore, when mistakes happen, either willingly or not, you know, not knowingly, but that board for the future. 

There are plenty of reports through McKinsey that can show how a business can be 36% more profitable with a very, very diverse board. And so, when I look at the stats also in investing, the relationship between only 1.5% of all invested goes to women, for example, but their success rate is far greater. So, I think, although we’ve talked a good talk about boards and diversity, sadly, we’ve acted very, very slowly. 

So, I think that essentially closing that gender, racial, and generational gap is something that is really a no-brainer now. You know, it is kind of whether that’s a silent board and you bring on a young youth team, whether that is taking somebody who essentially was going to challenge you, as well as you challenge them. And I think not being afraid, afraid of that. 

We humans are scared of change. We like to stay with the status quo; we can be quite rigid. And if it’s worked before, and we’re still making profit, and I think my team is still happy, and the customers are still buying, then it’s very easy to keep going along while not seeing what’s coming at an exponential rate at us. And I think, sorry, I’m sure you’ve got a ton of questions. 

So, I think recognising who all our stakeholders are not just those that essentially, we pay dividends to, driving trust in that area, and increasingly, literacy across technological advances, and sustainability, is going to be critical.

RM: Yeah, brilliant – great question. I just want to touch on a couple of things that you have said here. So I think we are talking about the nature-nurture element and us as individuals – we have this unconscious bias around the world we grew up in and the circles that we share, and until we allow ourselves to – in my space, for example, I like to listen and read to people who oppose some of my beliefs and thoughts in sustainability, you might call them climate deniers, you might call them lobbyists – that I believe in opening my eyes and ears to those conversations, but also the very nature that in sustainability, we talk about biodiversity.

Now, people can understand that the interconnectedness of biodiversity makes it all work, and it’s all in balance. The moment you break one of those tipping points – like the moment we stopped having wolves in Canada, or if we didn’t have whales in the ocean – it is a tipping point that hits every single species – and we as humans are the only ones that are trying to live outside of this interconnectedness. So, just touching on those points, being brave to take yourself out of your shell of what you think you know can really be empowering – and actually, diversity is the same as biodiversity; we all need each other to be interconnected – and that’s where the magic happens.

So, you touched on culture and also the role of sustainability; in a recent study, about 69% of everybody who has a sustainable role or a title within businesses has come from within have been internally trained, and so there is a massive shortage out there because that’s not really necessarily been coming through from education. I’m pleased to say I’m seeing it now at the GCSE level, and I’ve got two daughters; one is at that level. So, we’re seeing those topics, and there’s a new section in geography that talks about environmental risks.

So, it’s coming, but between now and then, we have this, this big gap. And I think that’s been led due to a lot of denials and lobbying over the last sort of five decades. So, recognise that if you’re going to upskill an individual within your business, they need to look and think bigger than just your business and your sector. Okay, so that would be my first piece of advice. My second would be that, as a board, you are accountable for delivering that.

So, I don’t personally believe that it’s down to just one, you know, Chief Heart Officer or head of sustainability. This is about how you are setting your KPIs within the business to reflect a modern-day organisation. So, what initiatives have you got? And who is responsible for those initiatives? Is the board bonused against sustainable initiatives? Has the entire workforce got a KPI within innovation and technology or within sustainability?

So, until that becomes part of your company’s DNA, you’re always going to be talking about one thing but not acting out in real life.

RM: Yeah, great question. And I think the key word there, and it’s not, you know, no pun intended, is sustainability.

So, having been in the corporate world, I know very often, and I’ve lived on that you put in your, you know, the kind of boards they write, what are your targets for this year? What are you going to achieve? You put in your target, and it comes back with plus another 10% on and you like, or eliminate, where did that come from?

The very notion of it being sustainable. So yeah, we can cut out technology, we can cut out training, you always find that the HR division will suffer. And we can cut out the headcount. So, we can keep restructuring, but at some point, you will hit a breaking point or a tipping point; normally, it’s on your people, essentially.

So, sustainable only really describes focusing on something that just because you’re doing it doesn’t mean that it is sustainable by its own nature; you can’t keep doing it. And if what you’re doing is wrong, then it’s sustainably wrong. You’re just going to keep doing the same thing.

So that’s why people are moving now and talking about purpose, profits, people, and the planet. And yes, none of us working in this space are expecting companies to break even every year; we need to talk about being profitable. 

RM: Yeah, and I think that’s a really great point because actually, the root cause of all of this that we talk about is, of course, our vision and our longevity.

So often, we’re looking at maybe a couple of years, we’re thinking about monthly targets, my end-of-year bonus, actually, I want to retire in three years, or I’m going to handle this business over, but it’s about questioning – well, what’s the legacy of handover going to be in 5-10? You know, 100 years’ time?

And how are my stakeholders, current ones and future ones, going to judge my performance? Now, of course, we have been beaten up for the last pretty much two decades between financial crashes, Brexit, and a pandemic; it has felt utterly relentless. And now, now we’ve got this fourth industrial revolution, threatening automation and jobs.

Some boards might think, yes, that’s more cost-cutting and money-saving. On top of that, we’ve got this huge and growing demand around, and we’ve got to be more sustainable. And you’ve got to think about your impact on nature from doing business. Sadly, we’ve taken so long over this that now it’s just going to be legislated.

So, there is going to be reporting emissions; there’s going to be a carbon tax, plastic tax, waste analysis, there’s new legislation coming in from the EU around greenwashing. All this stuff is coming because, essentially, we’ve been too slow, either kind of brushing it under the carpet, not really understanding it, and just focusing on one thing, and that being carbon, and that’s probably the biggest mistake you can make from the outset.

RM: No, absolutely listen, there are probably around nine major tipping points that we measure. So carbon is one of them. However, carbon and greenhouse gas emissions will include, of course, methane, which is 80 times more potent. So, I think a joke from last week’s session, the GOV UK Government want to give tablets to cows to stop them burping versus let’s carry on and still grant new fossil fuel contracts and oil and gas, which is completely contradictory to their carbon zero.

But other tipping points are things, for example, biodiversity loss, and the use of chemical fertilisers globally, which, as we know, goes into the soil, diet, essentially kills the soil, and then runs off into waterways and oceans. So, it has a huge impact on the planet.

When I talk about it, the biggest challenge here is really the future of humanity. Because we talk about the sixth mass extinction. And I have to be careful when I’m talking about things like this because this is when people start to go, “Oh, she’s going off on one; we’re all going to die or burn or starve or drown” ” It gets all a little bit, “whoa, you’ve gone too far owner”. 

But the reality is, as a trajectory between the 4th Industrial Revolution, and how that’s going to change our lives, and what we do, and what we don’t do in the working environment, as well as continuing to consume, I think that’s the keyword consume the planet’s resources, it cannot physically renew those resources quicker than we are taking them. So, at some point, we’ll get to a moment where you’ve got lots of people essentially not working, and you’re going to have lots of people migrating because the global south is suffering, potentially civil unrest.

So, you are going to end up with a mass extinction of humans. But what I’m really confident of is that Mother Nature is really amazing at regenerating and evolving using its secret weapons, you know, from mushrooms and fungi and the way trees talk to each other in the soils. That if humans weren’t here on the planet, she would be fine. She absolutely will be fine.

RM: Absolutely brilliant question. And I guess what I’ll do is I’ll share my top 10 with you, and maybe you can share it out, but I’ll pick a couple of them out. But essentially, what is your organisation’s sustainability mission and goals?

So, you will have as a business, or I hope you will have a mission, vision and values. And I would hope and trust that the culture of the business follows that ethos. So, first of all, ask yourself, how do we act and behave? And how do we take the 17 UN sustainability development goals?

By the way, you can’t do them all, and no one expects you to do them all. But you should be able to pick out three, four or five of those objectives that really marry with what you are doing as a business. Secondly, you need to start looking at what steps you have put into place to reduce your carbon footprint. So, even at a basic literacy level, we understand there are scopes one, two and three of carbon emissions. And I do understand that there’s a lot of carbon tunnel vision, but it is common knowledge and terminology now, so I get why people are rolling with this.

So, what have you done to either understand what your emissions are? and how are you tracking them? How are you measuring them? And I guarantee you, scope one and two are pretty simple. To get scope three is really hard because it’s your entire supply chain, anyone who supports you or as an external business, essentially measuring your percentage of those carbon emissions through that supply chain. So, I’m not going to lead you out in a false sense of security; that is a hard, hard area to get right.

I guess another question would be around, how do you talk about it or promote it internally and externally with your stakeholders? Are you knowingly greenwashing? Are you encouraging your teams, essentially, to come up with ideas with you? because I guarantee you, your teams working in their different divisions, whether you’re a product or a service, will have thought of ideas that will benefit the business, whether that’s as simple as reduction of waste or reduction in efficiencies. The good news is, guess what? That saves you money anyway.

So don’t look necessarily at if I was to implement sustainability, it’s going to be a cost on my P & L. Yes, there are going to be costs on your P & L. But I would also challenge you back, what’s going to be the midterm cost to your business if you don’t address these areas?

RM: Honestly, I, because we’re talking to boards and vary in different industries and sectors. So, take it, for example, if you are on the board of directors for a water company. I genuinely don’t know who’s on the call.

So, if you’re on the board of directors for a water company, I would envisage that at least you would grab one that looks at life in the water. Because essentially, your mission, vision, and values are around, I’m assuming, delivering maybe bottled water, which may be common goods and services. And so that would be a no-brainer. You’d also be looking at the sustainable development goal that looks at consumption, and also looks at wastage.

So, how are you, as a board member, delivering on wastage? Only 7% of boards across the UK are actually measuring and reporting water usage and wastage. So, it really is a very simple stage. Just look at the titles; most of them are no more than three or four words long. And go, “Actually, how does being here every day impact life on land, life underwater, inequalities, education, consumption, and technology?” I could go on and on and on. But that really is your starting point at the next board meeting, print them off, have them up on the board and say right, actually, do we factor any of these in?

RM: So, just to be fair, they’re just touching on that. I think this is where you can really get your stakeholders involved. So, find out what it is that they’re worried about, find out what it is. You might have a couple of key players in your organisation, employees who are really passionate about this and actually want to see change – bring them in as a non-exec, bring them in to advise you.

Go and speak to some of your grandkids or your nieces and nephews. Find out what’s really bothering them and then think, well, okay, how can I turn that into an opportunity for me? How can waste reduction impact my P & L positively? And I think as if you can lead by example. So, what do you do in the office, how do you do it at home, or some of the things that you might do with your family? You know, I talk about being a planetary citizen, as well as a corporate citizen.

Those are the things that you could align with all of your stakeholders and say, these are the four or five things that we are going to become famous for; we’re going to make a few mistakes, I’m sure, along the way, but there’ll be educated mistakes. So, I really liked the idea that it’s kind of becoming a corporate citizen, putting your hat on something and just going for it.

RM: I think it’s a really important point. And often people ask me why I should do it. It could be expensive. So, well, it’s not just the financial institution.

So, your investors and your bankers who are now expecting you, and that was done deliberately, I think, because let’s be honest, start with the money. If that drives legislation and questions, then the rest will follow. So absolutely, in the next generation, employers are looking for a place that they can be proud to work for and kind of becomes part of their character and culture a bit like, you know, years ago, when I was at Red Bull, I was so proud to work for that brand. I absolutely loved it.

And I think, looking and not only that, even me now in this space, I’ve turned down work where I’ve been openly asked essentially, to kind of help greenwashing or to work for companies that just are saying something on the outside, but actually, after a couple of days of scratching, they’re not and my husband’s like, what are you doing? That’s money, but I can’t; I’m not going to do it, I’m not going to do it; there will always be people that will.

But the reality is now, if you don’t start doing it, there is somebody out there who will scratch the surface. There are now lawyers who are not willing to fight for gas and oil companies, not willing to take people like me who might have protested at the big one on Friday or silently protested somewhere that you know that that movement is changing.

So, I think you, you’ve got to be able to embrace this but embrace it for the positive opportunities that it can bring and be proud that I guess I always say if anything that you are doing around the sustainable development goals could be perceived as unkind, unjust, dangerous, then I’ll happily stop what I’m doing tomorrow.

But I’ve scratched the surface of all of those goals and the objectives, and there’s nothing there. It’s a bit like working for a charity, and you’re not going to turn around and say, well, I’m not going to help children in Africa get a fair education.

So, I think that’s the thing to remember at the heart of this. It is about people and the planet and sustainable profit.

RM: Yeah, I think, first of all, just forget what anyone else says. Go around and go and have a play around with it. Literally, that has always been my best advice. Just go and have it play around with it; it’s really easy to open an account and kind of do that; I’ve done that myself.

Talk to the younger generation seriously; they know it, and they live and breathe it every single day. But take, for example, a smart contract within the blockchain and within AI that can drive you huge efficiencies for supply chain departments and procurement because what it enables you to do is without having to go right, okay, I’ve got my 12-month renewals now, and then I’ve got to do in six months, I’ve got to start the negotiation contracts off again, and all of that process, a lot of that can be so reduced in terms of time, because it automatically just happens for you.

So, whilst that’s happening, rather than looking at it and saying, then, I only need half my supply chain team. That’s when you’ll then task in your supply chain. So how do we transition them from goods and services that we are currently using into goods and services that can identify a better, purposeful people planet sustainable profit?

So, it’s about recognising the efficiency savings in time, but then how do we then do that 20 10%? How do we then challenge the supply chain team to think really innovatively, and you talked about it, about transformation? I find that incredible sometimes when we look at what people perceive as transformation, and actually, it’s just a little bit of change.

So, I think I should also take things like FinTech. Fintech is going to drastically challenge the way we do business financially. So, it’s going to remove a lot of middlemen and women; it is going to challenge what we as business leaders have often hidden or kept behind closed doors, and there is going to be more and more demand. So that’s my kind of little square. I don’t care, actually, because I will show that Sharon’s paid 10 pounds and nine pounds have gone to the project, and we’ve kept the pound to keep the lights on.

There are going to be more and more instances of businesses acting in that way that lots will wait and follow or wait till legislation. But this tech will really change the financial institutions that will change governments and legislation and policy as well. Because we’ll soon be able to dive into every pound that we, the government, spend, where did that contract go? Who was that contract supplied by? I mean, COVID, I’m sure, is some brilliant example of a tremendous waste of public money. So again, don’t be scared by it, but just know how you could use it to your advantage.

RM: Yeah, no, absolutely. It is. And I think what I would say to that is I’ve worked in very, very different organisations for one where culture trust and being able to challenge My MD or CEO was easy and welcomed and supported. In fact, that individual knew that when I left and took on a better role in the future, he’d done his job by me.

So, I grew up in that world. But then, moving forward into other corporate structures, there was a fear that you couldn’t, you wouldn’t dare challenge the head of finance or the head of sustainability or the CEO. So you have to ask yourself as a board, I’ve made the ability and that culture within the organisation to bring new ideas to be transformative and to, you know, I guess the way I look at it, I always love working with people that you sit there and go, Oh, God, why didn’t I think of that? That brilliant, genius idea. And I think you’ve got to ask yourself, Am I driving that behaviour in the first place? Am I open? Am I welcoming that?

There are different ways of doing that. You can do it openly and verbally, you can do it in forums, you can have little boxes that sit across different departments, and people can put anonymous ideas in or give anonymous feedback; there are different ways to do it. But yes, people are expecting more transparency of information; the Internet of Things has essentially allowed us at our fingertips to get information now. Information is often biased depending on who’s put it up there and controlled, etc.

I love being in a boardroom. And I love seeing the dynamics of different players, that actually when you allow yourself to feel a little bit vulnerable and allow someone to come in and challenge you in a really empowering way. When you then feed that out to the rest of the business to get consensus or see what you think, you’ll actually start to see that momentum move.

And I can’t exactly say it. To this day, the first business that I was in was the way we worked, the cultural aspects, the innovation, the risk-taking, all of that is so powerful. It is so powerful that 20 years later, you know, we are all still comrades and friends around the world. Most of us are entrepreneurs, and a lot of us have our own businesses. Please embrace it.

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    Sharon Constançon

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    Sharon Constançon

    Sharon’s deep understanding of Board behaviours, leadership and regulated industries supports her delivery of truly deep, insightful and practical board evaluations. Sharon is a mentor and coach to Chairmen and Directors and champion of the Company Secretary.

    Sharon has an MBA, is a Chartered Director and a Chartered Secretary. She shares her professional journey as a lecturer for the Qualifying Level Boardroom Dynamics course for the Chartered Governance Institute UK & Ireland. Sharon is on the Court and is Chairman of the Membership Committee of the Worshipful Company of Chartered Secretaries and Administrators (WCCSA) and is a member of the International Committee of the Chartered Institute for Securities and Investment (CISI).

    She is a contributor to the Risk Coalition and course leader for programmes and seminars run by the Corporate Governance Institute in Ireland.

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