Author's Name: Mark Schultz
Date: Tue 17 Nov 2015

Sustainability - the Board’s role and governance responsibility

What role does the Board play in the development, implementation and monitoring of the sustainability of the organisation it governs?

Firstly, why is sustainability a governance responsibility? The answer is quite simple – Board members are custodians of their organisations and are charged with the responsibility of ensuring they leave the business in “better shape” than when they were appointed to their positions. This outcome cannot be achieved if the 3 pillars of sustainability, namely Economic, Community and Environment are either ignored or not given the appropriate focus and attention in both the strategic and operational management of the business.

Secondly, it makes good business sense to include the 3 pillars of sustainability in the governance model; a few of the positive returns are as follows:

  • In a world where the environment is now very publicly in the social and political arenas, organisations that take a public and positive approach to environmental management are seen and generally regarded as good corporate citizens; whereas those that create environmental disasters or have poor records in this area are severely punished (fines, share/business value, consumer support) and publicly denigrated (current example, BHP and the Brazilian mining disaster);
  • The next generation of leaders, managers and staff consider the environment to be of much greater importance than their forebears and are attracted to an organisation who values the environment in their business model;
    Customers and consumers are attracted to environmentally responsible organisations who “ walk the talk” and not just provide lip service to this strategy;
  • Operating costs can be lower especially now that these inputs are further along the product like cycle, which generally means costs come down as products move from the formative to growth stages and more suppliers enter the market; and
  • The government and communities in general are being much more active in the areas of social and environmental management; furthermore, social media now provides a public voice and mass distribution for this increased activity. Poor behaviour is now much more difficult to hide from public scrutiny and so long as smart phones and the internet are in existence, then this phenomenon will not only continue, but more than likely grow to be a powerful force (if it is not already there now!).

How then does a Board incorporate sustainability into its governance responsibility and agenda?

The following approach is advised for the Board to take a leadership role in this aspect of strategic management:

  • Develop and communicate sustainability policies and procedures to all stakeholders and delegate the Chief Executive to implement, manage and report on the outcomes achieved at least 3 times per annum;
  • Allocate sufficient resources (people, assets, capital) to implement the policies;
  • Include the environment as a key plank in the strategic and business plans, not a mere side show;
    Include the subsequent reporting in the monthly/ annual board agendas;
  • Report on the outcomes achieved to both internal and external stakeholders; and
  • If disasters strikes have a plan in place, ready to enact, do not try to hide from or evade the issue – there is no such place available in today’s new social media world.

Sustainability is no longer an “optional extra” in the governance and strategic management of any organisation, large or small, for profit or non-profit. Business may arrive at a position on sustainability from different perspectives (compliance, good corporate citizens, generational, or market demand), however irrespective of the drivers, the outcomes achieved will benefit all stakeholders. Managing and leading change in such a key strategic area sits very comfortable with the Board and is one area that the Board should take a proactive approach (i.e. because it is the right thing to do) rather than a reactive approach (because it is something that has to be done). Both achieve a result, but the former reflects a positive culture and is an investment, whilst the latter merely conforms to compliance requirement and is seen and treated as a cost.

In summary, every Board should want to leave a positive legacy from its time as custodians of the organisation. Developing, implementing, resourcing and monitoring the 3 plank policy of economic, social and environmental sustainability will go a long way of achieving this outcome and generate a great result for all stakeholders.

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