Sustainability and the Boardroom

Estimated read time: 4 minutes

Of all the topics that are on monthly board agendas, it’s still quite rare that a conversation on environmental sustainability is initiated at the governance level. Yet environmental sustainability is recognised as one of six global mega-trends[i] that any enterprise should understand intimately.

Recent research indicates that 94% of Fortune 1000 organisations have sustainability policies, processes, practices and accountabilities [ii]. It is also not surprising that in the broader business community, more than 90% of Chief Executive Officers (CEOs) are aware of the risks of being unsustainable – although as few as 20% have developed plans to act.

Getting a grip on this issue can be challenging, even for seasoned boards that are accustomed to spirited and robust conversations. The topic is laden with preconceptions and can polarise views on its place within an enterprise. A point worth emphasizing is that regardless of individual beliefs around the science – the impacts are real and have significant effects on many organisations. It is worrying enough to overhear dismissive or assumptive conversation on the topic like “it’s a pile of green malarkey” or something similar, however what should be ringing alarm bells is the absence of conversation of any type – at any level whatsoever.

The topic of sustainability hides in plain view of many board discussions due to the profligate use of the word. It has many definitions and many more interpretations that can cloud meaningful discussions as to its usefulness in achieving strategic outcomes. A helpful realisation happens when boards understand that sustainability isn’t a ‘bolt on’, or something that can be done in isolation. Instead it is ‘baked in’ across all organisational disciplines and is integral to the thinking, planning and decision making of the leadership, management and staff. In other words it is – or should be – a part of every basic organisational function because it’s a discipline that drives efficiency.

It is common that boards will leave the issue of sustainability off their agenda, perhaps assuming that – if it mattered – the CEO/Managing Director (MD) would raise it and deal with it at a leadership level. This is where boards must engage and push for a thorough and thoughtful appraisal of the risks and benefits of sustainability. This action is firmly within the duties of governance encompassed by their role. As Milton Friedman intoned – “companies that do good – do well”, and Australia doesn’t lack for strong ‘early adopter’ thinking with Westpac, Origin Energy and IAG being among the top 100 most sustainable companies globally. This is also reflected by their reputation and share price.

“The market views sustainability as being about the future long term financial performance of an organisation … and this view is determined by how well the company governs itself, treats its staff and delivers for its customers and the broader community”.
Source: David Morgan, CEO Westpac

Progressive not-for-profit and community benefit organisations such as Uniting Care Connections are also very focused on environmental sustainability as a driver for achieving their strategic goals. They have realised that there are a lot of things boards can do to heighten their awareness and satisfy themselves that they aren’t being left behind. Many board members ask trusted colleagues or associates what they are doing in the sustainability space and the responses can be surprising. Most, however, readily admit to a lack of knowledge about the topic and an assumed reliance on management to lead the issue.

It’s also true that sustainability can suffer from an image problem. It can be diluted to an academic issue when considered in a non-specific context, however, getting too specific can divert attention away from the core benefit of becoming more efficient. At its heart, sustainability is all about efficiency. About doing more, with less. About using fewer (renewable and non-renewable) resources in the most operationally efficient way. If directors aren’t challenging their management to show the business case for or against sustainability, then they aren’t executing their duties correctly.

Being sustainable has been likened by some to the unwelcome rule of a discipline master at a boarding house – but only at first. Once the territory has been claimed, behaviours normalise around the new rule and it gets into the thinking, planning and execution of daily operations. It’s a process that can take 3 to 5 years to imbed in the culture. If you’re lucky it will graft so strongly as to become the driver to achieving nearly everything else in inspirational and magnificent ways. Don’t believe me? Then spend 15 minutes and check the link to Ray Anderson’s TED talk;

http://www.ted.com/talks/ray_anderson_on_the_business_logic_of_sustainability.html

One thing I hear a lot is “…but not-for-profits and community benefit organizations are different – we don’t have the resources (financial or human) to get across this issue”. Different indeed, but not without means, and – more importantly – not without the curiosity and determination to exercise good governance across any issue that can impact an organisation’s viability. There is a wealth of information available in the public domain on this topic, yet a paucity pertaining to governance or board level discussion. We owe it to the people we serve to ask hard questions and examine our exposures, consider the opportunities and conduct fierce conversations where necessary. An excellent starting point for CEOs and board members is to read Paul Hawken’s book The Ecology of Commerce (Harper Collins, 2010).

A great CEO will bring this issue to the board table and help initiate the process, but what if that hasn’t happened yet? Then it is the duty of the board to ensure that their organisation has a considered and reasonable position on sustainability. For board chairs, however, there is an additional responsibility – they must take a position of ‘thought leadership’ on the topic. They must facilitate a proper introduction and full and robust discussion, so that their organisation can choose its response appropriately. Proper execution of their ‘thought leadership’ duty on sustainability can create a lasting legacy with transformational capability.