Thursday, November 24, 2016

Engaging Boards of Directors on Sustainability is a Key Success Factor

Boards of directors can play an invaluable role helping a company to inculcate sustainability into their DNA. Because of their unique position, boards of directors are well placed to integrate sustainability into business strategies and practices. This supports both the long-term profitability and the viability of an enterprise.

However, there is a disconnect between what is good for a firm and what they are actually doing. Most boards of directors are not engaged in sustainability even though almost all managers and directors think they should be.


Benefits
Companies that have engaged boards of directors are more than twice as likely to successfully accomplish their sustainability initiatives. Sustainability has become a mainstream phenomenon and benefits of sustainability have been well documented. This includes a plethora of research that demonstrates strong ROI.  While success is correlated with companies where colloboration was supported by boards, the success rate is cut in half when company boards where not involved.


Failure to engage

Despite the benefits, many boards of directors are not getting involved in sustainability. The disconnect between what is good for a company and what they are actually doing represents a missed opportunity. Research conducted by MIT Sloan Management Review, The Boston Consulting Group and the UN Global Compact, indicates that 87 percent of managers and executives think boards of directors should be engaged in sustainability yet the research suggests that only 10 percent are actually engaged.  An annual report from The Conference Board titled CEO Challenge suggests that CEOs are not turning to their boards of directors to address sustainability challenges.

Collaboration

Almost all managers and executives (9 out of 10) say that sustainability requires collaboration. According to these executives and managers, collaboration serves reputation and brand building, innovative products and services and the transformation of markets towards sustainability. Collaboration between companies, workers, governments, civil society, investors, and academia can augur a range of societal benefits including putting pressure on suppliers to develop a responsible global supply chain.

Antidote to short termism

One of the problems associated with sustainability is the failure to lay out a long-term strategic view. Getting boards of directors to engage with sustainability enables a company to develop long-term` strategic thinking. This includes longer term forecasting, planning, and preparation. It also enables companies to do a better job of zeroing in on risks and opportunities. Together this contributes to a focus on long term success.

Take-away

The take-away is clear, boards of directors should be given explicit oversight of sustainability issues and boards need to allocate time to sustainability issues. It is also highly desirable to have board members with expertise in the sustainability particularly those areas that are most material to the company.

Resources

Two years ago the UN Global Compact launched a program to help "move sustainability issues from the backroom to the boardroom". This program is tailored to the needs of the individual company and delivered in-house by a roster of international experts.

The UN Global Compact Program helps Boards to:
  • Align on the strategic imperative and materiality of corporate sustainability as critical for the company’s long-term viability
  • Realize the integral role that Board members can and should play in overseeing, incentivizing and driving corporate sustainability, by embedding it into Board duties, composition and structure
  • Take action to demonstrate leadership on Board adoption and oversight of corporate sustainability with investors, employees, customers and other stakeholders

For more information and strategic guidance consult the following documents from the UN Global Compact:

Joining Forces: Collaboration and Leadership for Sustainability
A New Agenda for the Board of Directors: Adoption and Oversight of Corporate Sustainability
Corporate Sustainability: An Important Agenda for Boards Of Directors


Related
Businesses are Thriving with Sustainability and Risk Dying Without It
Why Corporations are Embracing Sustainability
The Business of Sustainability Reaches a Tipping Point in 2015
Corporate Sustainability in 2016: The Rise of the CSO
Businesses Adopting Science Based Emissions Reduction Targets
2016 Corporate Sustainability Leaders
The Business Case for Sustainability
Carbon Reduction Makes Good Business Sense
Sustainability is a Business Opportunity
Sustainability Best Practices Case Study

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