 So welcome to this first series of podcasts a new series We are introducing to our thought leadership contribution around board leadership and governance My name is Richard Calland I'm a professor of law at University of Cape Town and also a fellow of the Cambridge Institute for Sustainability leadership And I've been asked over the past year or so to develop a new strategy for our engagement with boards Our point of view is that boards matter. They've always mattered But as the legal and corporate governance Landscape shifts so the risks and opportunities for companies But especially for boards and the directors who sit on boards is really changing seems to me There's a step change required of board members and that they need to look out of the window see that opportunity Recognize the risks And then to begin to rethink how they direct oversee and are accountable for the Organizations that they hate the buck really does stop with them now We have engaged a number of people in an advisory group and some of those people are going to be the Interviewees that I will discuss and explore these various issues with over the course of the coming months The first Interview in this new podcast series on board governance and leadership is Maria Yacht She's a Danish board professional investor and advisor She sits on a number of boards and has a really I think interesting perspective on The role that board should be playing at this particular point in corporate history She's based in Denmark and it's a great pleasure to welcome her to this board series. I'm Richard Calland fellow of the Institute for Sustainability and Leadership at Cambridge and a professor of public law based at the University of Cape Town Maria welcome Thank You Richard. So I would say I think the first time where I Kind of came across sustainability was probably back in 2005 I was working with the Danzke Bank the largest Danish Bank and they had Initiated a data-driven approach to CSR It was a new fresh thing to do back then and they built a small team that were to drive the agenda across the organization of Approximately 20,000 employees and I still remember they got an engineer to run the team because it was quite technical and the quality of the Data and getting the data was tough on the other hand data was Key for getting access to the agenda of the board and of the senior management team So that was sort of the first time that it that I kind of came across it and and what I Noticed as well was how so what we learned with the CSR team at Danzke Bank was that it actually had an influence on all Employees so it was not just the report. It was also the actions that came out of the initiatives So we all learned to reduce use of electricity and we learned to print less And the plastic cops disappeared and of course a lot has happened since then But I just still remember the visibility of the actions that that kind of made an impact on me And then today of course many years later the data driven approach to sustainability Is still key in order to speak the same language as the rest of the business as society so to speak And it is I would say the only way to get access to boards and to senior management teams It is to speak through data So can I interrupt you and ask you to explain why that is because to some of our listeners It may not be apparent either what you mean by data in this context or the relationship between what I might call the kind of Corridors of power you're talking about that's the way into the boardroom through data Can you just amplify that a little bit and talk us through that? it's because data is substance and In boards and in senior management teams you spend a lot of time on financials That is what tells you whether you are doing the right things whether you are achieving the results that you set out just to achieve And in order for sustainability to become just as an important part of the agenda You need to use and have the data again because it creates substance It creates something to follow up on it sets an opportunity to set ambitious goals And you risk if you don't have data to support your ambitions You risk that you only have words and nice looking reports and glitter and that is not substance and thereby you might actually end up not getting the opportunities and actions out of the initiatives related to sustainability that you could get That's a very powerful argument But on the other hand once spent like you probably since around 2005 spent a lot of time watching powerful people in politics government on the one hand in the private sector and the other Not listening to the data ignoring the science refusing to shift their business as usual approach So it's a bit of a digression from our main conversation. But can you just reflect on that? Yes, I think there are several key points to this One thing is for a long time It seems like someone else's problem that if for example your bank, what is your responsibility? How can you truly make an impact if your software building company? How can you truly make an effort? And I think the difference now is that everyone has to make an effort No matter what industry they in and this is something that's being expected by stakeholders. So it's your investors It's your employees. It's your customers. It's your suppliers It's they all expect that you have sustainability as part of your strategy and your ambition. So it's becoming License to operate and I think that's new And and back to our board conversation and that kind of route into the board structure. I'm a political economist I'm always interested in power Where do you see the power sitting in the modern era in the modern company? Is it really with the board or is it not still very much with the executive? How would you see that landscape? I see that it still very much Sits with the senior management team, but The board has an increasing responsibility to make sure that we set the right ambition level when it comes to sustainability and I actually see a number of drivers that is changing the powers a little bit because that said I was in a board meeting a few weeks ago And the board the company is partly owned by a private equity company And the private equity fund has set up quite ambitious targets when it comes to sustainability across their portfolio companies So they bring in ambitions and expectations when it comes to setting a higher ambition level For sustainability in this company and that is a new kind of pressure that I'm seeing And I actually like the way that investors to a larger extent is demanding An increased ambition level when it comes to sustainability So it's no longer as much up to the individual board or board member It's also now up to the investors to add the pressure. And I think that's one side another side that I See is the driver that is coming from the EU So the new regulation such as the corporate sustainability reporting directive Which requires large companies operating in the EU to disclose information on their e-steep performance And I think setting a directive that hits the companies of the same size In the same way Also put sort of a lower level as to what you Must deliver. So it's no longer as subjective. It's no longer. What do we need to do? That ambition level has now been increased and I like the fact that it's Less subjective now, it's more rule based and I think that's important as well And that shift in the rules is coming as you put it from both equity owners shareholders Investors on the one hand, but also now regulators. So that's a double pressure But again, I want to come back to this. I think really important relationship between the board and the executive And let's take each of those examples in turn In terms of that shareholder Are you saying that because in that case the equity owner is the equity asset manager is a Shareholder that it has a kind of hotline into the board because of that fact. Is that the pressure point there? Yes, so they are actually on the board as well So they have a voice in the board So once a discussion starts around setting the ambition level you might have one board member saying Let's do it the pragmatic way. Let's do it as Light as we have to and then you have another investor saying We have a strategy that goes across all our portfolio companies. This is our ambition And that is then their agenda then we have a discussion I actually like that someone comes in and raises the ambition For sustainability in the board and it's no longer something where you can just say let's just have the pragmatic way This is also business and it is becoming more and more licensed to operate and I think more investors are seeing that as well Very good. And on the other example of the EU regulations Isn't that really the responsibility of the executive to follow the rules and comply? Isn't it a compliance agenda? And if so, how does the board get its teeth into that? Yeah, so the board of course get their teeth into it because they need to have the checks and balances That's kind of what they do. So they need to make sure that data Is delivered that ambition levels are reached and that they follow up on the development on the target set. So What I see is that the new regulation will bring sustainability data Into the boardroom just like financial data. So it will be it will have to be audited by an external auditor It will have to be discussed sometimes in an audit committee before it reaches the board So that means that it goes through the same channels as the financial data And I think that is key again for making sure that sustainability Is just as important as financial data. It's an add-on. So I think that is changing the game So that makes complete sense to me that you've got on the one hand now objective criteria and goals are being set And secondly relatedly That that kind of data has been treated the same level of seriousness as financial data that clearly are very Powerful potential in relation to that But how does the board you mentioned audit committee maybe we'll come back to structures in a moment But how does a board make sure that it knows enough to really understand the data? I'm sure you Maria sat on in board meetings as I have And really wondered whether as a board member We understand the information well enough and whether in fact the executive which has day to day Grasp up of the information and can kind of manipulate it and channel it and spin it Sometimes in a way that maybe we won't even appreciate. We won't know what we're missing. How do you see that issue? I see that issues as being a key issue, but it's not just related to sustainability It goes across you don't have even levels of information So there's a lack of that's kind of an information lack between the board and the senior management team and sustainability Of course is just part of that but it goes across when it comes to Executioner strategy financial data, etc. So what is key for board members is if they get information They don't understand they need to ask because they have a responsibility And they need to make sure that they keep asking until they get Answers they understand and that's why we need to have discussions. So I might actually fear that The regulation might on the other hand just bring historical data and reporting Into the boardroom and we might Forget or not have time to discuss what we have ahead of us So I think that's the backside that we will have to spend so much time making sure we understand the data Is the data of good enough quality? Is it the right data? Is it actually the initiatives that will have the greatest effect that we have identified? Those discussions are important, but we need to make sure that we don't drown ourselves in Historical data. We need to make sure we also have time to look forward So Thank you for that my third blog on the blog side of things as opposed to the podcast side of our Contribution to thinking about these difficult topics in relation to board leadership and governance Talks about the power of a good question And how if nothing else a good board is able to ask the right question at the right time of the right person on the right subject And it seems to me you're suggesting that's the case, but how does a board make sure that it can be in that position to do that? What's the kind of Skill set or the way that it needs to work hard and invest if necessary time and money into being Able to spot that moment and put that question But you're absolutely right. I think that is the most important Part of being a board member you need to make sure you ask the right questions And in order to do that you of course need to make sure that you have enough knowledge to do it So you need to educate yourself and as a board you need to educate yourselves to make sure you actually understand What does sustainability mean for this business? How do our peers work with sustainability? How do we make sure we set the right again agenda and the right ambition level for the company? So you need really need to educate yourself as a board member in order to be able to ask the right questions That is that is key And do you think that's about having the right people on the board? Or is it also about having the right structures to help one do that? You've mentioned the subcommittee classically with finance. It's about having a good Capable audit committee in the case of sustainability therefore it might be about having a good sustainability subcommittee I suppose might it also include having a kind of shadow board of thinkers and Institutes that one might call on as a board to kind of supplement and support the board's ability to ask those questions at the right time It could be I haven't seen it in the boards. I'm in there I would say the responsibility really is on the board members to make sure that they are Fit so to speak But I would say I think what is really really important is this shared ambition level when it comes to sustainability So you don't end up Discussing should we do it or should we not you know, is it a report or is it a part of our strategy? You know, so I think getting the right ambition and being aligned across the board and of course with the senior management team That is super important to make sure we get the right discussions. So it's not just about That's too ambitious. We don't think we'll get the right amount of business out of this I think so I think it really is about understanding. How do we see sustainability within this Company and that should be shared across the board and senior management and then you can easier I think accelerate the implementation of the of the targets Earlier in this conversation used the word increasing in the context of boards having to step up and acknowledge the Responsibility they now have without naming names. Do you see that happening in the boards that you sit on and see? Are the boards raising their game? Are they recognizing this increased level of responsibility? Yeah, I would say that happens across. I mean, I'm on six boards and across all of them The game is being raised and if someone Kind of you know, does not take it seriously a few really Don't yet But most do they are becoming the small voice now in the boats where I think maybe just a few years ago It was not the same willingness To understand why this is so important to Incorporate as a key part of your strategy and the fact that this is really moving out of HR department communication departments And into the core of the senior management team So moving on and again without wanting you to name names unless you want to what are the central characteristics of a board that kind of gets this and which is Able now to not just step up in terms of that increased level of responsibility But really embrace sustainability as integral to the commercial future of a company I mean, I've actually been thinking about that. I would say it It comes from different different angles. So Sometimes it can be the younger voice in the board Sometimes it's not so sometimes it's the most experienced voice in the board so I wouldn't say that I can see an obvious pattern and I when I still meet the the conservative voice You know, how little can we do that is usually from someone Who is old fashioned by mind a bit stuck in the old world Which was just a few years ago, but it does not necessarily have something to do with only age or even gender So I would be very careful about putting someone into brackets because I have been quite surprised As where I have seen this agenda being pushed from in the boats But I'm just really pleased to see that is now that is now across all the boards. I mean That I see a willingness from top senior level to race again And of course presumably in that back to this sort of structural question The ability of the board to have the right kind of relationship with the CEO and the top executive team I presume must be critical to this There has to be trust between The board and the senior management team and there also has to be an understanding that it might influence The profitability of the business for a while To do what's right when it comes to sustainability And I think that is one of the challenges that you meet in the board and as a senior management team That you have dilemmas. This is not easy, especially not in a time where the world is right now where you have Increasing inflation. You have increasing interest rates. You have worn Europe. You have so many other things that are burning platform In your business And on the other hand, you also need to drive the sustainability agenda and they might not always be aligned So I think it's tough out there right now To make sure that you do what's right in the longer term On the other hand, you also need to make sure that your company survives in the shorter term And that's where dilemmas come into the senior management teams and into the boardroom And I think that's what we're seeing now and I think we'll be seeing more of that That it might be more of a challenge to do what's right. Not because you don't know it's right But you need to make sure that you can pay salaries and that you still have a company in the next 12 to 24 months So you're describing a pinch point a double peril on the one hand the peril Of what is clearly the speeding up of climate change and the fact that the science tells us we've entered a critical 80-year period where we have to get on to a different economic development pathway But at the same time an economic crisis Which clearly threatens the commercial viability Or prosperity of many commercial entities It seems to me Again on this relationship between the board and executive. It's very hard for the executive to manage that alone because The executive typically will be at the height of its career You get to ceo. It's the pinnacle of your career All of your professional training and ambition has gone into that and then suddenly The science or the reason tells you You've got to row back and make less money be less good at your job I'm caricaturing. Isn't it therefore really important for the board that doesn't have the same incentives? And there's a different point in its life its career to be able to look back and from a helicopter position say no No, no, no the right thing to do for the company and for the planet and for society is is something different Exactly and that's why the board needs to be aligned With the strategy and support the management team. They have to be the hand on the back Because these are tough times so they as a senior management team You need to know where you have your board And they need to be able to while they are super busy making sure the everyday is running as good as it could Can they need to make sure that their board keeps focusing on the longer run? So it's not all about taking out fires The board has responsibility to keep the long life so to speak on but in order to do that You need to have trust into the board and the management team, of course And then on the other hand, you also need to make sure that your stakeholders understand What is the long-term strategy of this company? And that means that investors and customers and employees say they need to stay loyal And they need to put their money and the time where their values are And that might cost some money here and now but we need that kind of behavior to do what's right in these tough times Otherwise, we're kind of rolling a little bit back. That's what I would be fearing Maria, thank you very much indeed. I think that's such a good moment such a powerful message to end on I'm not going to disturb that by asking another question and we're kind of with a perfect timing point In terms of a good podcast length. So I'm going to say that's perfect