BOARDROOMS IN CHARGE OF SUSTAINABILITY By Marga Hoek Marga Hoek is a global business and thought leader on sustainable business and capital. A non-executive chairman and board member, she is also author of The Trillion Dollar Shift, gold medal winner in the best business book sustainability category in the Axiom Business Book Awards. Risks and Opportunities The evidence suggesting that boardrooms should prioritise sustainability is growing rapidly. Due to fast rising risks on the one hand and more and more facts to support sustainability’s opportunities, sustainability is positioned at the top of boards’ agendas. The risks are more obvious than ever, with environmental disasters, poor labour relations, safety incidents and scandals increasing. The World Economic Forum’s Global Risks Report, released every January, notes that environmental concerns, specifically climate change, top the global risk list. In this digital era, transparency is key, whether one likes it or not. Reputations are at stake, as well as investments. The risk now lies clearly in nonsustainable business practices and investments. Policies on integrated reporting, procurement and disclosure are progressing, pushing
companies in the direction of sustainability – even if this isn’t happening apace quite yet. Environmental, Social and Governance (ESG) risks are common knowledge by now and are not only investor related. Companies’ fiduciary duties to not only oversee governance yet also social and environmental aspects, will only grow. By now, sustainability is defining a company’s ability to operate as well as being core to a company’s competitiveness.
Surprisingly though, there is currently a huge gap between awareness and subsequent action. Nonexecutive boards are generally used to working with the usual nomination, remuneration and audit committees’ structures. They do not put it on the strategy agenda and to be honest are, overall, reluctant to adapt to incorporate sustainability in their structure and agenda. There is both a need to change and an opportunity to make it financially worthwhile. Thus, I foresee and support change.
Sustainability: both risks and opportunities
However, for boards, sustainability is not only a risk factor. It is thus not only a purely defensive matter, yet an offensive challenge as well. Sustainability influences financial returns both on the risk as well as the opportunity side. It offers opportunities for long term value creation, unlocks new markets and thus can drive profitable growth.
Frontrunner companies show us the way forwards and I am happy to be able to contribute to a number of them. Nestlé, for instance, recognised the significance of sustainability for the company and installed a combined nomination and sustainability committee, that ensures their managerial sustainability and oversees the long-term succession planning of the board.