A recent news story attracted my attention: “Shell has abandoned plans to cut oil production each year for the rest of the decade, in a shift in approach to firmly target fossil fuels and increase payouts to shareholders under its new chief executive.”
This got me thinking about the future of net zero. The effort must come from companies to achieve net zero by 2050/60/70. CEO changes often lead to changes in strategy. A disruption in strategy imposes costs on the organisation and influences short-term financial performance. In the case of climate efforts, it also impacts national and global goals. CEO succession can be of two types (a) internal: new CEO comes from within the company, and (b) an external person is hired into the company. Research shows that hiring an external candidate is more likely to lead to strategic change. Changes in the business environment also bring about strategic change.
While the shift in strategy is important and visible, the CEO may also slow down the pace of moving to net zero. If unannounced, this may be difficult and time-consuming to figure out.
So, what can stop the new CEO from making a dramatic U-turn on climate? Pressures from communities, NGOs, and other stakeholders, certainly. But more critical is the role of the board. How can it incentivise new CEOs to bind them to continue the net-zero strategy? Often, boards do not possess the necessary intent, or the drive to impose climate goals may be compromised. If the boards fail in their duty, the shareholders must come in. Then, it becomes a question of the power they hold.
What do you think? How can corporate goals be tied to overarching national or international needs?
Postscript: The head of renewables at Shell has resigned – an illustration of costs imposed on the company.
Utkarsh Majmudar 