Hard coding sustainability action into governance structures
We are surrounded by enormous challenges but the mood has changed and 2021 comes with an expectation of progress. Amanda Powell-Smith of Forster Communications and Klara Kozlov of CAF discuss why sustainability leaders need to look at whether their organisation has the right governance structures in place to enable brave intentions to become reality.
Sustainability practitioners are the first to understand the reality of what ‘build back better’ means and what it could or should look like. When we interviewed leaders for our report Bold Thinking, Brave Action, we saw how they are taking responsibility to drive change with and beyond the vision of others, and we identified consistent attributes that were core to challenging the status quo.
We also heard about the importance of organisation conditions to enable bravery to thrive. Yes, bravery is something that can be channelled by individuals, but it also needs to be supported and encouraged by the system and structure in which that individual is working.
Three groups of organisational conditions were identified by participants: purpose – what makes us do what we do and what makes us ‘us’; people – who we are and the culture we want; and practice – how we do what we do and our ways of working.
Discussions on purpose and culture are already wide-ranging; without a clear vision, openness to change and provision of psychological safety that allows individuals to speak up, progress is unlikely. But understanding of the link between corporate governance and sustainability success needs to increase. While it stands out as part of the ESG acronym, it is too often relegated as a reporting function rather than a decision-making tool.
Governance is the only mechanism an organisation has to systematise its commitments for change. It also ensures that the pace of internal action is matching the demands of the outside world. Critically for sustainability leaders, it is the individuals who are responsible for an organisation’s governance process – both executive and non-executive directors – who need to understand and support sustainability action.
As one of our respondents said: "One condition for bravery is having access to some funding – not necessarily millions of pounds, but enough to enable innovation, testing and learning." Gaining permission for both investment and time for outcomes to be generated will require board level backing.
Sustainability professionals often face a heavier burden of proof than other functions when demonstrating cost savings, return on investment or other business benefits; there is an imperative to start measuring and disclosing actions immediately. But with that needs to come decision maker understanding about the journey of change and the importance of the destination.
A sustainability leader told us about the moment of change that was reached when their board recognised the growing level of detailed questions from external stakeholders: “That’s what drove our investor board to change our articles of association, so we now take account of environmental and social impact alongside financial returns."
Fortifying an organisation’s governance with sustainability expertise can be one of the most effective ways to enabling new action, unlocking investment and focusing board attention on how the issues that are material to on-going success are being managed. It is here that sustainability leaders may be able to play a ‘covert’ role in helping to hard code sustainability action into governance structures.
From educating existing non-executive directors around the imperatives and complexities of achieving net zero goals to appointing new individuals who bring knowledge and confidence to ask questions and support the CEO with decision making; the skills and knowledge at the board table will make a critical difference to how a sustainability team is able to perform.
We were told: “The big pushback at the time was that [the sustainability programme] would compromise our financial performance. But the management team believed it was the right thing to do for us and society, and they have been vindicated as we halved the embodied carbon in the business while cutting rather than increasing our costs."
Real progress will come only come from ensuring that ESG is not an investor tick-box process but an embedded set of principles on how the purpose of the business is being delivered. Or, as one of our interviewees said, "Shifting from a risk narrative to an opportunity narrative has helped destroy the 40-year cycle of ‘the business of business is to do business’."
So as we respond to the climate challenges ahead and work to ensure we really do address the inequalities highlighted by the pandemic, let’s ensure that those sitting round the board tables and leading on governance, accountability and investment decisions are also pushing for bold sustainability action.Amanda Powell-Smith