Ex Alstom Power chief and chair of Corporate Leaders Group of Climate Change demands new approach to corporate governance to tackle environmental risks
Philippe Joubert is reluctant to select a single Road to Damascus moment that prompted him to make the transition from chief executive of a multinational company to one of the world's leading green business advocates, instead crediting a "certain mix of conviction and meetings" with people who helped him think "faster and better".
But the former boss of engineering giant Alstom Power, who is currently chair of the Corporate Leaders Group on Climate Change and CEO of consultancy The Green Option, does highlight the role the Cambridge Institute for Sustainability Leadership (CISL) played in opening his eyes to a reality he argues all CEOs and their boards should understand.
"You realise there is a big "lie" behind the publication of results and performance," he recalls of his experience at CISL where he now sits on the advisory board.
"As long as you consider nature as free and unlimited, which is not true anymore, you cannot believe the numbers. All this profit people are reporting is just paper profit and a lot of the time it is losses, when you consider all the costs."
It is this big picture assessment of the current state of governance that Joubert believes more and more of his CEO peer group is willing to countenance. "When you are CEO of a big organisation like Alstom Power, which at the time was a €15bn organisation with 50,000 people around the world, you are exposed to a lot of information," he recalls. "And unless you do not want to see things or you are crazy or stupid, which is hopefully not the case if you are a CEO, you really have a problem with what you can see is happening [to the environment and the climate]. The generally admitted reality now is that business as usual is not possible. A lot of businesses now accept business-as-usual is not possible, but they also know you will not have a solution without business."
The challenge for both business leaders and world leaders preparing to gather at next month's crucial Paris Summit is how to translate this growing realisation into a global low carbon economic transition the scale of which has never been seen before. In comments that would make some of his more neo-liberal former corporate jet class colleagues balk, Joubert is clear that the starting point has to be an honest appraisal of current market failures and an acceptance that both businesses and governments have a role to play.
"There is no solution without government and there is no solution without business," he argues. "It is a fallacy that the market will solve this, the market will never solve this issue, because this is external to markets and we are very careful to make sure it stays an externality. The market will never react this way, because [the environment] is external to it. It is very comfortable at the moment."
However, Joubert is confident this market failure can be tackled through politicians and business leaders addressing two crucial and related issues: governance and the way corporate performance is measured. "The conviction I have is you will not change things unless you change governance and the way to measure performance, both collective and individual performance," he says.
Joubert argues corporate governance needs to be addressed at three levels: the national level where governments need to give clearer signals about the need to decarbonise; the business level where boards have to better understand their responsibilities in addressing environmental risks; and the individual executive level where people need to be better incentivised to meet environmental goals.
It is at the board level, Joubert argues, where a serious re-assessment of priorities is urgently required. "For me, you first have to revisit the real purpose of why a company exists," he says. "There has been a taking over of the role of the business by the financial short term markets. Business was never created to create only profit for shareholders in the short term. Business was created to increase the comfort and happiness of the collective, of which the shareholders are part, obviously. I am not denying the importance of the role of the profit... We need this to build the company, but we do not need to be slaves about short termism."
It is an argument that would likely prompt protests from some quarters that boards have a fiduciary duty to solely focus on maximising profits for shareholders. But Joubert insists such an approach is based on a very narrow reading of corporate regulations. "That argument is either immoral or wrong legally," he counters, arguing how corporate reporting requirements increasingly make clear that boards have to address long term risks. "Fiduciary duty has never been synonymous with short term shareholder interest. [Climate change] is already a basic business risk you have to cover. And I challenge the idea you can limit the purpose of a company to producing results for shareholders."
To help promote this thinking more widely Joubert is working on plans for a new initiative with CISL, dubbed Earth on Board, which aims to provide board level executives with a better understanding of their long term responsibilities. "The centre of the governance issue is at the board level," says Joubert. "The non-exec director and the directors need to understand they are not just there to serve the shareholders. They are there to serve the company and the company is an independent entity that has multiple stakeholders, including nature."
The new programme is to feature three main elements: an assessment of current board engagement with long term issues: a guide featuring 11 questions boards should ask their CEOs regularly, and series of interactions for board-level executives with experts and Cambridge, scientists, and other boards. "The peer approach works a lot as it is a really distinct community," Joubert reflects. "That is why I'm working with the Board Directors Association so we can make sure they understand their role and understand some boards are already doing this. There are boards that are exemplars on this."