Companies need to align with the values of contemporary society to retain their reputations
In order to avoid the recent traps into which BP, Cadbury and the pharmaceutical industry have recently fallen, the boards of companies need to take a stronger leadership role to integrate the triple bottom line of social, environmental and economic considerations, according to a new report.
At its AGM last month, BP faced criticism from its shareholders over environmental and human rights; Cadbury is being forced to consider the issue of slavery on its cocoa plantations; and 39 pharmaceutical companies were forced into a climb-down following a legal battle in South Africa over the price of AIDS drugs. Such loss of reputation need not have happened had the companies concerned been paying greater attention to the triple bottom line, according to The Power to Change: Mobilising board leadership to deliver sustainable value to markets and society, published by the international think-tank SustainAbility, and the Price of Wales International Business Leaders Forum (IBLF).
Based on analysis of corporate practices around the world, the report highlights how firms’ boards can take a leadership role in addressing today’s commercial and societal challenges, but without necessitating them to take on additional functions. In particular, the report lays down six ‘LEADER’ principles:
- Leadership needs to be taken, especially by CEOs and Chairs through ownership of their companies’ triple bottom line agenda;
- Engagement with outside perspectives;
- Alignment – both internal and external – which would achieve coherence between policy and practice;
- Diversity in board composition in order to foster creativity and independent thought;
- Evaluation of both the board itself and the company as a whole to track and reward triple bottom line performance; and
- Responsibility and ultimate accountability by the board for the activities of their company.
“To call for board leadership is, for many who prefer a low-maintenance, low-profile board, a provocation in itself,” said Peter Zollinger, co-author of the report, and Executive Director of SustainAbility. “As the high profile cases of the last weeks illustrate, board directors – both executive and non-executive – need to understand and respond to changing societal expectations about the role of business. They need to communicate what they consider to be realistic expectations of what business can and cannot achieve, and what they consider to be responsibilities of others. To achieve this, boards need to be fully engaged and transparent.”
Nevertheless, responsible behaviour is occurring within even some of the largest multinationals. “The practices of a diverse range of companies, including South African Breweries, Ford, The Novo Group, Dow Chemical, Shell, Rio Tinto and DuPont – explored in the report, indicated that leading boards are starting to address societal challenges,” said Jane Nelson, co-author and IBLF’s Director for business leadership and strategy. “But, the report also shows that there is still a long way to go for the vast majority of boards.”
The Power to Change: Mobilising board leadership to deliver sustainable value to markets and society (ISBN 1899159029, 44 pp) is available for £40 from SustainAbility’s website.
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