The role of executives in ESG strategy
If you’re an executive at an early stage or growth company starting to think about ESG, this is for you. While ESG must be company-wide to be successful, efficacy begins at the top.
Corporate governance commitment is the secret of successful sustainability programs. You’ve got to have set alignment from the top of the organization to make sure your company is running a successful sustainability program.
Why?
If you’ve decided to start sustainability in the organization through audits or initiatives, you must start with the company’s governance and leadership before you begin. Sustainability is a significant undertaking (it feels like I say this in every blog, do I say this in every blog?)
Because sustainability can be a time, money and employee-intensive program, approval and guidance must come from the top. It doesn’t work any other way. The best way to embed sustainability into a business is to start with governance. Effective sustainability governance ensures sustainability is enacted into all corners of the company.
The best way to ensure sustainability alignment is to have corporate governance and leadership on board and set up to support sustainability.
Corporate governance in any size company is the board of directors, the executive suite, the main leaders of the organization. Governance is the rules and values that run an organization. Usually carried out by senior leadership and the board, governance makes the organization run.
A strong governance commitment to sustainability makes sure the company stays the course when employees get overwhelmed with sustainability or when it begins to get pushed down people’s to-do lists. It also ensures future decision-making includes sustainability. This decision-making could include partnerships, supply chain decisions and hiring.
Think of the functions of your company’s existing company governance structure. This governance system determines funding, policies and rules, vision, strategy, and executive leadership. Sustainability will need to be approved and moderated by governance to make it effective.
Here are the steps to take to integrate sustainability into your corporate governance structure, and therefore your entire company. Sustainability needs to be celebrated, approved and adopted by the company’s governing structures to be effective.
Draw from Existing Governance Practices
How does your existing governance meet and make changes? Include sustainability in the next meeting as one of those changes.
“Use your existing governance structure to set up how to add sustainability to the company. Understanding how governance operates in other areas is critical to understanding how it will operate in terms of sustainability.”
Use your existing governance structure to set up how to add sustainability to the company. Understanding how governance operates in other areas is critical to understanding how it will operate in terms of sustainability. In most cases, add sustainability as you would another critical function of the company, maybe adding it as a line item for discussion or including it as a resolution to vote on.
Make Statements or Amendments to Set Up Sustainability
The board might need to vote or discuss the strategy, need or point of adding sustainability to the company. Let the board discuss and determine why the company is adding sustainability. Don’t be afraid of the discussion! It’s critical to hear everyone’s opinion and have to argue if you’re the one promoting sustainability. If the board is on the fence or needs something concrete, draw up a proposal or slide deck on how sustainability would be beneficial to the company.
You can then put the decision to a vote or at least a decision to continue talking about sustainability in the future.
Related: How to Conquer 5 Obstacles to Sustainability
A statement or amendment is unique to each company. This could mean amending company by-laws or voting to include a new sustainability policy into the company. Sometimes at companies, a simple statement from the board or executive leadership team is the step to include sustainability. It can be extremely powerful to say “We are committing to sustainability.” Putting it in notes, or formal minutes from the meeting.
Making a statement of sustainability does not mean you have your initiatives figured out or that you’ve scheduled any actual work. It’s the statement and plan for work that is the responsibility of the board. A sustainability statement from the board is like a commitment, the corporate governance is announcing their intention to focus on this, allocate resources and support executive leadership in their upcoming tasks.
These Actions Must Follow the Statement
Once you have the action and directive from governance, it’s time to make the corresponding actions. While a statement is powerful, it needs the corresponding action to prove the point.
Imagine you hear a company announce, “We’re committed to safety!” And that’s all you hear. What do you think?
Compare the above to the same “We’re committed to safety,” announcement with links to a safety policy, signed statements from executive leadership and a website safety page. Much more credible and concrete.
So, you’re going to need some actions to accompany your governance announcements. This doesn’t have to be actual initiatives or sustainability actions yet, think of it more as pathways sustainability will flow through. What actions will create a path for sustainability to work? Let’s call these Sustainability Action Pathways.
Draw up a sustainability policy for the company
A sustainability policy outlines your commitment to sustainability, steps to take, core values and mission statement and objectives of the policy.
The point of the Sustainability Policy is to make it clear to all stakeholders where the company stands on sustainability and makes sustainability part of decision making. It’s the most concrete way to show, “We’re committed to sustainability.”
Related: Start Corporate Sustainability Policies and a Roadmap for Successful Resource Reduction Policies.
Assign Executive Leadership to Sustainability
Executive leadership is responsible for holding up policies to promote sustainability and making sure all parts of the company are involved. This should go down from manager to manager to get sustainability started.
While the nuances of this are specific to each company and made for other blog posts, it should be made clear to the executive leadership team they are responsible for sustainability. They are now tasked with getting employees to complete initiatives, performing an audit and goal setting for sustainability.
From a corporate governance perspective, at this point, we are looking for confirmation and understanding from the leadership team they are now responsible for sustainability. This should feel comfortable and in alignment with other company functions (marketing, sales) that are ultimately their responsibility.
“Executive leadership is responsible for holding up policies to promote sustainability and making sure all parts of the company are involved. This should go down from manager to manager to get sustainability started. ”
Identify Company Policies to Update
This is the final governance “action,” and because these policies usually need either the board or executive approval to change, they should be included here.
What other company policies can be modified to include sustainability? At this point, a list is a solid starting place. Make a schedule to update these policies or assign specific updates.
Policies include the Code of Conduct, Safety Policy, Supply Chain or Statement of Employee Values. Gather these policies to determine what needs to be updated. Add sustainability to employee hiring and review processes. Employees should be hired against sustainability policies for culture fit and reviewed against them for completion.
Again, specific changes are further down the line with actual initiatives and audits, but listing them now will help when you go to make changes.
Share Corporate Governance Changes
The final step in taking governance action to support sustainability is to share it. Share the outcome of governance meetings with stakeholders, customers, and employees.
Changes definitely need to be shared with employees before the public. Announce the changes to employees as you would other significant changes. An all hands call or meeting is usually the best way. Be sure to have an open forum for questions and feedback and provide an internal website where they can find more information.
In external sharing, beware the safety example. If you don’t have everything ready, share with stakeholders when they can expect to see concrete action from you. It looks cleaner if you can share your governance statement alongside the “pathways” or at the very least the promise of future pathways. Sharing the statement alongside updated policies and other information proves you’re serious.
But if you’re anxious to share, or it fits your brand to say something like “We’re too excited to hold it in, we’ve committed to sustainability. Follow here for updates!” go for it. And then link to a sustainability webpage outlining your intended commitments, including what stakeholders can expect in the future.
Those are the steps necessary to set up your governance structure for sustainability. To successfully blend sustainability into governance, make sure you stick to your existing structure, set up meetings or minutes to facilitate sustainability, create the right sustainability pathways and then share your success.
What other questions do you have about governance and sustainability? Share in the comments!
This blog was originally published here in February 2020.
