New Metrics

What Makes a Board Fit for the Future?

Any regular follower of SB knows that most companies must transform their business models if they are to start helping - rather than hindering - society's transition to a sustainable future; and this year will only see expectations grow, with the launch of the SDGs.

By Geoff Kendall | Published 9 years ago | About a 4 minute read

Meaningful transformation has to be driven from the top, so the need for effective board oversight has never been greater; it has also never been more challenging.

In a recent webinar hosted by Helle Bank Jorgensen, a panel including the Global Chairman of Unilever, the Chair of the CSR Committee from PVH Corp. and Managing Director of BlackRock was assembled to discuss the crucial board questions of our time. A general consensus was reached that a balance must be struck between long-term goals and short-term gains. Sustainable short-term shareholder returns will result from a clear, company-wide strategy for long-term success.
We know that the board has a fiduciary duty to oversee the long-term direction and health of a company; however, directors typically have a full agenda when they meet in the boardroom, and many boards do not discuss how sustainability relates to business success or failure. And even fewer boards discuss the success and failure of the society in which they operate and are the basis for their existence.

Given the scale and complexity of the growing number of issues facing business and society, can we expect the board to fully grasp and focus on what really matters? The answer is yes - if given a clear destination to aim for, and a means of tracking progress toward it.
Bob Willard and Geoff Kendall had this in mind when they began work on the Future-Fit Business Benchmark (FFBB) and reached out to Helle for insight. The idea of assessing a company's performance relative to some kind of benchmark is nothing new, but current approaches tend to dwell on what other companies are doing. For the board, this focus on others can be counterproductive: Spend all your time looking at those around you, and you're not looking toward where you need to be.
The FFBB takes a different approach, more in keeping with the long-term view the board must maintain. Building on best-available science, the FFBB tackles two key questions. First, what would a truly sustainable business look like? And second, how might we measure progress toward that point?
The answer to the first question takes the form of a suite of future-fit goals, covering all major environmental and social issues. These goals define the performance threshold beyond which the company stops simply being 'less bad' and starts contributing to society in a net positive way.
The second question - how to measure progress - is addressed through a corresponding set of future-fit KPIs, one for each goal. These highlight the gap between where the company is now and where it must ultimately be.
In a recent article, Helle recommended five things that boards can do to improve their support for sustainability. Here’s how the FFBB can help with each one:
1. Show leadership on sustainability – The aspirational future-fit goals help directors reach a shared, big-picture view of how the company's business model must evolve if it is to thrive in a truly sustainable economy. This shared commitment is critical when bold action is needed.
2. Establish the right incentives – When the board is able to identify the biggest gaps between current and future-fit performance, it can make sure that the executive team is incentivised to close them.
3. Establish a culture of integrity – Several future-fit goals relate directly to establishing a culture of trust, for example through transparency on lobbying activity and how corporate investments are made.
4. Oversee implementation and communication – Future-fit KPIs provide an at-a-glance overview of where attention is needed and why, and where advances are being made. This provides a powerful tool, both for monitoring progress, and for internal and external communication.
5. Stay informed – To engage stakeholders in a meaningful way, a company needs to build trust. Articulating a clear vision and an authentic plan to do what's necessary - for people and planet - is a great way to start doing that.
To make companies fit for the future, we need a new kind of leadership. We suggest that the Future-Fit Business Benchmark can help boards, by giving them something that has until now been lacking: a science-based North star by which to steer their companies onto a course toward both short- and long-term prosperity.