Great governance by boards of businesses and cross sector organisations doesn’t happen by magic – it needs to be proactively designed and nurtured.
It will be no surprise to anyone involved in the leadership of a business or cross sector agency that it forms the backbone of an organisation’s integrity, creates the conditions for positive behaviour internally, and provides assurance to stakeholders externally. There are lots of ingredients needed to make it work effectively, yet here at the IoD we often hear from our members that they don’t feel governance is given the spotlight or dedicated attention that it should be, given these highly evidenced outcomes.
This comment came up again at our virtual global conference last week, where we explored the role of leaders and the boardroom in the race to net zero and beyond. There was a warm welcome amongst delegates for focusing specifically on the responsibilities of board directors in this space – recognising that in their collective and individual roles they have a significant part to play in bringing a sharper concentration and greater ambition to responding to the climate emergency.
What was concerning though was we found that 63% of delegates polled said they are still wrestling with how to apply good environmental, social and corporate governance (ESG) to their business practices, and so it wasn’t a consistent current priority on their agenda. They cited the complexity of the issue and uncertainty of where to get practical support as factors stalling progress.
In the last 18 months we have seen organisations in communities across Scotland forced to make fast, reactive decisions; pushing the business plan to one side and pivoting services and operations to deal with mitigating the impact of the pandemic. But now that leaders are making the transitions into the new “business as usual” and making medium-to long term plans, it’s important that governance is approached in a refreshed way, reflecting the new ways of working but also the – literally – changing landscape. By employing and modelling high standards of governance, leaders and boards create the conditions to help organisations react positively to change; be it the pandemic, the climate crisis or technology acceleration. Without well-designed structures and leadership in place – along with the dedicated time to plan collectively – organisations may find themselves using their energy trying to keep up with change instead of being at the forefront.
In terms of getting started, the consistent theme is measurement: figure out what you need to measure, because what you measure matters when it comes to ESG. Being transparent about those measures and putting reporting criteria against them on the agenda at every board meeting is crucial – every director is a sustainability director now and so must be held accountable accordingly.
If we consider that ESG is just as important as financial reporting, then it will almost certainly move up the agenda for many within the business or organisation. There is no doubt these are complex and complicated times as we navigate our path to a just transition for all. As leaders balance the challenge of recovering from the pandemic and tackling the escalating climate emergency, good governance is a vital part of the jigsaw when it comes to not just sustainably future-proofing businesses and organisations, but building forward better (not back).
As Douglas Lamont, CEO of Innocent, said at our conference: “If we’re going to steer the world to a fairer, more sustainable future, the most important thing in the boardroom is that everyone is thinking ‘how do I balance people, profit and planet?’ This is going to be the governance that we all require.”
Louise Macdonald is national director of IoD Scotland