Sustainability is one of the most important challenges, and opportunities, of our time. And businesses are powerful enablers in the sustainability-led transformation journey. Some champions are aligning sustainability and business strategies by actively addressing the material change needed in business models as well as the extending responsibility across value chains and external systems.
There are many other companies just starting to understand the relevance of sustainable development — as well as why it matters for the business, and how a multi-stakeholder approach can inform decisions leading to positive impacts.
Expectations of the responsibilities of board members continue to grow. While financial performance dominated center-stage for many years, along with regulatory compliance, digital and innovation strategies have now become more important in creating a competitive advantage.
Today, sustainability is a vital addition to the board agenda. Concurrently this change is also reflected in an evolving understanding that organisations need to operate with higher levels of purpose and corporate responsibility.
Delivering financial rewards is clearly still important but it needs to be treated as one of the components of the company’s ‘triple bottom line’, which encompasses consideration of people and planet along with profit.
There are still many who cling to the outmoded notion that sustainability and profitability are conflicting goals. However, this is not the case. Increasingly, multiple stakeholders, including investors, are calling for companies to pay attention to social and environmental impacts.
Sustainability in the company
Sustainable development recognizes that there is just one earth and that humankind cannot continue pursuing growth, or producing and consuming in the same manner, if there is to be anything left for future generations. The statistics, science and research outline the alarming consequences of unrestrained consumption. The time to commit to a change in mindset and act is now.
Taking a sustainability lens to business mirrors the complexities of managing in a world where leaders navigate multiple and often competing demands.
The lens can be used to examine and review a company’s risks, from climate change to natural capital or modern slavery. Identifying a company’s role in waste and environmental damage and helping organisations think about costs as well as assets in a different way are other key activities.
Sustainable development is a key driver of future business success. New business models, industries and customer needs are rapidly evolving as leaders consider how companies will deliver value using innovative approaches. These perspectives can help leaders ensure the resilience and relevance of a company’s future business.
For many industries, it can be a part of business, or whole of value chain consideration. Sustainability permeates all the way through the organisation. From people to operations and finance, from sourcing to compliance, from social responsibility to design — digital solutions and innovation can play a significant role in enabling positive progress.
Sustainability-oriented thinking helps to reframe the company’s role in creating a future that is about doing well and doing good. It is certainly much more than corporate social responsibility and compliance.
Transparency and disclosure
Sustainability reporting is a key tool to drive better outcomes. Knowing the external impact of the business, its baseline, targets and strategic trajectory, are critical data points to effective governance. When a company measures results and tracks its progress, it will make better decisions on information that matters and have the motivation to improve.
Sustainability disclosure is about capturing the most material impacts of an organisation’s
operations from a multi-stakeholder perspective. These economic, environmental and social impacts have financial implications for a business, from capital raising to brand value, to costs associated with waste, employee loss and new customer acquisition.
The GRI Standards — the world’s most widely used for sustainability reporting — enable organizations to understand, manage and disclose these impacts.
Leaders in sustainability reporting share the perspective that a company must deliver financial returns responsibly, usually taking a longer-term approach. Over the last few years many stock exchanges and regulators around the world have mandated for sustainability disclosure. As head of GRI’s ASEAN Regional Hub, I am pleased to see the Singapore Exchange, Bursa Malaysia, Stock Exchange of Thailand, Philippines Stock Exchange and the Indonesia Stock Exchange all reference or reference GRI reporting in their policies.
Championing sustainability in the boardroom
Sustainability is no longer a ‘nice-to-have’ for senior management. Increasingly, well-governed boards are including achievement of sustainability goals in consideration for performance bonuses.
Boards that take longer-term views integrate sustainability in their business strategies. Such boards will have a board member or board committee with explicit responsibility for the corporations’ sustainability goals and environmental, social and governance (ESG) outcomes.
Directors have an important role in driving the sustainability agenda and should consider the following points:
1. Facilitate the right questions. Ask for the data and question the status-quo. Encourage management to use the sustainability lens to identify the transformation required.
2. Allocate adequate airtime in board meetings for sustainability topics and establish committees to ensure progress.
3. Drive discussions from a multi-stakeholder, longer-term perspective.
4. Ensure sustainability has a strong voice at the board level, in executive leadership and in innovation investment portfolios.
5. Require responsibility for sustainability to be distributed across the company’s leadership supported by leading key performance indicators.
Corporate leaders need to rise to the unprecedented social and environmental challenges. There is growing public expectation and a commercial case for businesses to shape and champion the sustainability-led change needed for a better future — not just adapt to it.
The reality is that pursuing sustainable business practices makes good business sense. Companies can be sustainable while also contributing strong financial returns, if they consider a long-term perspective that understands, considers and balances the competing demands of multiple stakeholders, along with people and planet. The GRI Standards is an enabler for companies to do this effectively.
Committing to sustainable development is not easy, but we need to accelerate the rate of change. Like anything new the path is uncertain and there is a lot to learn — but the process is proven. There is much to be done if we are to collectively affect the current trajectory of companies’ triple bottom lines.
This article was adapted from a version that was published in the quarterly bulletin of the Singapore Institute of Directors (July 2020).