Organizational Governance Organizational Governance

Is Your Board Competent and Proactive on Sustainability? It Should Be

It was the mid-‘90s. The Board of Directors at Vancity – a large regional financial institution based in Vancouver, Canada – was struggling to get management’s attention on its social purpose agenda. I and the other directors believed that marrying social goals with the company’s business could create a powerful vehicle for regional prosperity: attract customers, become a force for social progress and build business. The impasse continued until our Board identified a key leverage point: incorporating our social business objectives into the CEO’s incentive pay. That turned out to be the difference-maker.

Published 9 years ago | About a 3 minute read

It was the mid-‘90s. The Board of Directors at Vancity – a large regional financial institution based in Vancouver, Canada – was struggling to get management’s attention on its social purpose agenda. I and the other directors believed that marrying social goals with the company’s business could create a powerful vehicle for regional prosperity: attract customers, become a force for social progress and build business. The impasse continued until our Board identified a key leverage point: incorporating our social business objectives into the CEO’s incentive pay. That turned out to be the difference-maker.

What we were able to achieve over the next 12 months was dramatic. Suddenly, the CEO and his direct reports became very, very interested in corporate social responsibility (the term we used at the time).

Coro Strandberg,
speaker
at
SB'16 San DiegoBack in the mid-‘90s there was no guidance for Boards seeking to protect and create company value by addressing social and environmental trends. Ten years later, in 2008, I conducted the first global study into the role of the Board of Directors to steward a company’s sustainability performance for the Conference Board of Canada (one of its most downloaded reports of all time). Since then, many organizations including Ceres, the UN Global Compact, Calvert Investments and others have recognized that sustainability will not progress unless and until Boards build their capacity and oversight in this area.

Much has changed for the better but progress is slow. Research I conducted into sustainable pay incentives for the C-suite reveals that there continues to be a Board obsession with short-term financial performance. Even enlightened Boards fail to grasp how to incentivize sustainability innovation. More work lies ahead.

Fortunately, the guidance noted above and other resources are now available. For example, this is the tool I use to assess the maturity of a company’s sustainability governance: CSR / Sustainability Governance Assessment Tool for Boards.

Further, we are witnessing a propitious trend where governance professionals are taking a leadership role on these issues. This year, the Canadian Society of Corporate Secretaries created a new award, “Best Practices in Sustainability and ESG,” which recognizes best practices in Board sustainability stewardship. Now that fiduciary duty has been defined to include sustainability, more Boards will travel this path. The UN Global Compact is releasing guidelines for corporate secretaries this summer, expected to transform the role of the governance practitioner (Contact me if you are interested in receiving a copy of this guide when published.).

Twenty years after I struggled with my Board colleagues to advance sustainable progress at Vancity - lacking the business case, governance guidelines and a roadmap - sustainable governance is now within reach. Boards of Directors are looking to be proactive on sustainability. Let’s help them.