Are UK boards owning their responsibility for sustainability?

15 Jan 2020

Are UK boards owning their responsibility for sustainability?

Sustainability might be the headline pressure facing boards, but it is just one of the mounting challenges requiring a new level of performance.

Sustainability is a multifaceted issue confronting senior business leaders.

For CEOs, it’s a route to competitive advantage in their industry, as 79% of those surveyed confirmed in Accenture research in 2016.

Investors, on the other hand, are seeking out those companies that integrate Environmental Social and Governance goals into their mandates. And it’s clear why.

Research indicates that the companies that do are growing significantly above the average, by 23.6%, in fact, as Willis Tower Watson reported in 2019.

Then, there’s the pressure of regulators who are placing ownership for promoting longer-term sustainable success firmly in the hands of the board.

Responding to sustainability

So, what are boards doing about all this?

Some boards may have “sustainability” on their agenda, but not much more. Some are challenging the CEO’s proposed strategy for climate change readiness.

Financial services organisations must nominate a non-executive director to their board to ensure that the potential risks and liabilities regarding climate change are being mitigated.

But is this enough?

After all, sustainability is not just about responding to climate change with ‘environmental’ policies and practices. Social and governance obligations must be given equal weight.

And the challenge doesn’t stop there.

The sophistication, extent and pace of change across consumer demand, operating models, technology and sources of financing means we are watching traditional leading players being overtaken by new challengers in many sectors.

For boards, simply maintaining the status quo is not enough. Quite the contrary.

Corporate purpose redefined

In response to these new demands, sustainability has evolved to become a distinctive purpose.

The influential Business Roundtable (BRT), an association of the CEOs of nearly 200 of America’s most prominent companies illustrates this progression.

They have redefined the purpose of an organisation in 2019 to go beyond the overriding commitment to meeting shareholders demands for short-term growth.

As one CEO spelt out the new mission: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” (HBR, 181 Top CEOs Have realised companies need a purpose beyond profit, August 2019).

Shifting the board focus

Boards that aspire to balance a range of stakeholders' goals are refocusing their agenda, changing their behaviours, and stress-testing their strategy, operating model, governance model, culture, investment allocation and leadership. All with the aim of generating profits that provide long-term solutions to both people and planet issues.

“A successful company is led by an effective and entrepreneurial Board whose role is to promote the long-term sustainable success of the company." Financial Reporting Council, 2018.

The chairs and board members of such far-sighted, purposeful boards will be more likely to lead organisations that will transform their sector, the lives of many, and our world.

Transforming board performance

If your board aspires to be better, we can help.

We have developed workshops designed to support boards become more purposeful and agile, optimising the application of their diverse skills, experience and mindsets of their members.

The workshops include:

  • Building a purposeful culture
  • Future-proofing your strategy
  • Effective decision-making
  • Dynamic governance
  • Influencing stakeholders
  • Active succession planning

To find out more, please get in touch with our Board Effectiveness and Development team.