BOARDS AS STEWARDS OF SUSTAINABILITY
Sunil Puri | Jane Ang
The July, 2024 edition of ‘The Hub’ highlights a research report from Stewardship Asia which provides insights from board directors across Asia and the Pacific on the strategic importance of sustainability. It emphasizes the need for boards to integrate sustainability into decision-making processes, governance structures, and corporate culture. The document highlights the values that boards must embrace, such as long-term thinking, taking ownership, interdependence, constant learning, and resilience. It also discusses the concept of "True Steward" boards, which view sustainability as essential for future-proofing the organization. The document suggests that boards should allocate more time to strategic initiatives focused on sustainability, innovation, leadership, talent development, organizational culture, and technology. Additionally, it addresses the challenges and readiness factors related to sustainability stewardship.
Why Boards Must Steward Sustainability:
To Be a Good Fiduciary
“Why are you in business, of course, you want to make money! However, if you’re having lawsuits left and right, if you’re having to do damage control, if you’re having to make repairs, if you’re having to send your people to the hospital due to injuries, then obviously, you’re not going to make money, and you are not taking care of the business as you should as a steward.”
To Meet Stakeholder Expectations
“Board members must adopt a multi-faceted perspective, considering the views and interests of customers, investors and employees. If a supplier or a customer tells you that you need to be certified, or you need to be compliant, board must ensure the organisation finds ways to fall in line.”
To Create Long-Term Value
“As a board member, it’s imperative to recognise that the neglect of environmental, social and governance (ESG) initiatives could have far reaching consequences for the organisation. While it might seem that these initiatives primarily address ethical concerns, they are intricately linked to the organisation’s overall success and longevity.”
To Align Profit with Purpose
“Good boards understand that while sustainability is an ethical and moral subject, there are financial implications. While organisations are about profitability, there is a paradigm shift now, and sustainability, purpose and profits have to match and move ahead in tandem.”
To Look Beyond Regulation
“Compliance is often not an answer. You cannot legislate moral behaviour. So, in my view, it’s got to be a good mix between leadership-led enlightenment and a regulation which is very light touch but forces you to do things in a proper manner.”
Top priorities for organizations in terms of sustainability:
- Risk Management
- Innovation/Competitive Advantage
- Regulatory Compliance
- Capital Investment
- Sustainability/ESG (Environmental, Social, and Governance)
- Leadership/Talent Development
- Technology
- Financial Performance
- Organizational Culture
These areas represent the focus of strategic initiatives that are crucial for driving long-term value creation and sustainable growth in today’s rapidly evolving business landscape, as highlighted in the research report.
How do board directors view the pursuit of shareholder wealth in relation to environmental and social considerations?
Board directors often view the pursuit of shareholder wealth as taking precedence over broader environmental and social considerations. There is a prevailing mindset among boards where the pursuit of shareholder wealth creation is given higher priority compared to broader environmental and social considerations.
What values do board directors appreciate in their journey to steward the sustainability agenda?
In their journey to steward the sustainability agenda, board directors appreciate the importance of adopting a values set comprising long-term thinking, taking ownership, interdependence and collaboration, constant learning, and resilience. These values are essential for boards to navigate complex challenges and opportunities, ensuring that organizational strategies are aligned with sustainable outcomes that benefit not only current stakeholders but also future generations.
Note: Views/opinions expressed in the report are of the authors and do not necessarily represent IICA’s stand.
(IICA duly acknowledge the ownership / authorship of the research report and republishing the same for educational purpose of Independent Directors)
