Report: Executive boards failing to 'walk the walk' on sustainability
Corporate board directors are failing to deliver tangible environmental impacts despite incorporating sustainability into a company's ethos, a new report has found.
The report, ‘View from the Top: How Corporate Boards can Engage on Sustainability Performance’, highlighted short-term thinking and poor company-wide linkage as the main factors in continuous 'weak performances'.
The report, from nonprofit organisation Ceres, found that these companies could be missing out on a socially-responsible market that has grown by 76% since 2012 and is now worth $6.57trn.
The report interviewed dozens of corporate directors, senior corporate leaders, investors and governance experts in the US and found that “except in the case of a few leading companies, it is often unclear whether board sustainability oversight is achieving meaningful performance improvements.”
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Ceres’ president Mindy Lubber said: “While we’re seeing improvement from corporate boards on sustainability concerns, they still have a long way to go in terms of governance processes and bottom-line action.
"As more companies are increasing their efforts to tackle climate change and other sustainability challenges, it’s critical that corporate boards realise and embrace a stronger leadership role, and do it more smartly.”
Several strategies were highlighted throughout the report that have been successfully implemented by a small amount of large companies that Ceres feels directors should adopt to boost effectiveness.
The report suggests focusing on company-specific issues that significantly impact operations and revenues. Unilever’s board involvement in the company’s Sustainable Living Plan - which counted for half of the company's growth in 2014 and grew at twice the rate of the rest of the business - was recommended as a template which other companies could use to improve results.
The report said regular framework conversations should be implemented at board level involving individuals in charge of sustainability strategies to enhance organisational approaches on key issues. Nike’s use of a Sustainability Committee to discuss how business strategies are aligned with sustainability was highlighted for its success.
The report also suggests that companies should avoid over-emphasising on short-term returns by nurturing sustainability and long-term thinking in strategic planning. Successful examples of this include Unilever, Coca Cola and National Grid which have all moved away from issuing quarterly earnings guidance.
Previous Ceres analysis found that out of 600 of the largest publicly traded U.S. companies, only 32% incorporate sustainability at the board level. This is despite the current report showing that strong corporate sustainability practices lead to superior financial results.
The findings of the report mirror that of edie’s exclusive energy management survey which found that despite businesses focusing on behaviour change and technology upgrades, funding remains the biggest barrier to initiating energy-saving programmes.
More than 60% of respondents said funding was the greatest barrier, while 32% claimed that 'selecting and implementing the right technology/programmes' was a stumbling block in implementing sustainability into a company at board level.