- Humanity is threatened by several existential crises—climate change, social inequality, indiscriminate use of Earth’s resources and cybercrime, to name a few. The need of the hour is urgent attention and concerted action by all stakeholders. Embracing sustainability isn’t merely an ethical choice; it is a business imperative. Positive corporate action provides strategic advantage that can bolster a company’s bottom line and ensure its long-term viability. Such actions also help organisations attract top talent, access cheaper capital, enhance brand image and reputation, and create new business opportunities.
- ESG (environmental-social-governance), which has emerged as the preferred framework to organise corporate action, is generating a lot of attention and dialogue, but resulting in inadequate impact. A governance-led approach, primarily based on regulation and incentives, is necessary but not sufficient in solving environmental and social challenges. Some organisations, however, create the right leadership conditions based on a larger purpose and shared stewardship values to balance financial, environmental and social sustainability. These values are long-term thinking, interdependence, ownership mentality and creative resilience. Such organisations practise “steward leadership,” which is the genuine desire and persistence to create a collective better future for all stakeholders. They consistently create value not only for shareholders but also for employees, customers, partners and society. They continuously innovate and grow their topline while solving social and environmental challenges.
III. While “doing well by doing good” is enabled by management teams, board support is critical. The board’s role in driving the sustainability agenda has traditionally been underplayed and rarely talked about. As the senior-most representative group in any organisation, boards hold implicit accountability towards enhancing value for all stakeholders. Yet, they often spend a disproportionate amount of time on historical financial performance evaluation and regulatory compliance, often at the expense of sustainability, leadership development, innovation and organisation culture.
WHAT WE LEARNT (Chapter II, III, IV)
- At the core of the board mandate lies the duty of “good fiduciaries,” where the board is entrusted with safeguarding the interests of stakeholders and ensuring the long-term prosperity of the company. Based on their belief that businesses will succeed more if they provide society with what it needs, exemplar boards ensure profit is pursued with a broader purpose which aims to maximise the positive social and environmental impact of business. By integrating sustainability into corporate strategy, such boards create long-term value, ensuring the company’s continued relevance and success in a rapidly changing world. Exemplar boards not only provide astute oversight and ensure transparent reporting and compliance but also drive long-term value and help curate a culture of sustainability.
- The success of boards that act as “true stewards” pursuing the “doing well by doing good” agenda hinges on their intent and ability. Intent refers to the mindset, values and purpose that boards demonstrate in genuinely tackling global challenges while creating value for all stakeholders. Ability, on the other hand, entails the capability of boards to integrate sustainability into the business strategy while possessing the necessary skills, leadership, governance and processes to drive the sustainability agenda effectively. Factors influencing the intent and ability of boards to embrace the sustainability stewardship agenda include: jurisdiction and company context in which boards operate, their readiness to embrace sustainability, quality of leadership, nuanced knowledge about sustainability, and seamless strategy-sustainability integration.
- Qualitative and quantitative board data collated across 11 countries in the Asia-Pacific suggests that sustainability is seldom a board priority. Only 1 in 5 boards discuss sustainability in all meetings, and knowledge of sustainability as a decision criteria for new appointments is still at best a good-to-have in 3 out of 5 boards. Board action on sustainability is often prompted by compliance requirements and pressure from the regulator, and responsibility for sustainability is rarely shared by the entire board collectively. Lack of knowledge on sustainability is the biggest staller, with 3 in 4 boards citing it as a challenge they must overcome. The “heart” of boards, or the intent, however, seems to be in the right place. 1 in 3 board directors consider sustainability as an integral part of the corporate purpose. A significant fraction of respondent board directors aspire to spend more time (than they currently do) on sustainability, innovation, talent development and organisational culture while rationalising the time they spend on financial performance evaluation and regulatory compliance.
VII. Boards in the region have different orientations or archetypes based on their intent and their ability to address sustainability challenges. There are five key archetypes: Passive Followers exhibit a lack of proactive engagement with sustainability issues; Box-checkers primarily focus on compliance with regulatory requirements; Do-gooders are driven by a moral imperative to contribute positively to society through corporate actions; Risk Navigators prioritise sustainability as a means of mitigating business risks; and finally, True Stewards, boards that embody a holistic approach to sustainability, integrate ESG considerations into business strategy and decision-making. These five archetypes are not static states of evolution, and boards may transition between them based on internal priorities, organisational context or other external factors.
WHAT WE PROPOSE (Chapter V)
VIII. Since long-term shareholder value is intricately linked to addressing societal and environmental concerns, boards must re-think their fiduciary responsibilities. Rather than waiting for the regulator to “tighten the screws” before they feel compelled to take drastic action on sustainability or viewing sustainability as a checklist of tasks, boards must provide direction and support management in shaping a corporate culture based on values and purpose that promote sustainability. Boards must also be wary of perceiving sustainability only through a prism of risk. They must champion innovative thinking, empowering management to devise business strategies that not only address but also capitalise on pressing societal and environmental issues.
- Introspection, regarding their focus on driving the sustainability agenda, is a good place to start for boards with genuine intent to make a difference in the value they add to all stakeholders. They must follow such reflection with an honest assessment to identify gaps in their intent drivers and ability factors to push the sustainability agenda. Boards also need to subsequently develop strategies to transition towards becoming True Stewards. This may involve setting specific goals and targets to enhance their commitment to sustainability, investing in training and development programmes to build the requisite skills among board members, and establishing mechanisms for accountability and oversight.
- Finally, boards must focus on promoting an enterprise-wide culture of steward leadership. This can be achieved by establishing a Steward Leadership Compass that articulates a company purpose that caters to a wide variety of stakeholders and a shared set of values rooted in stewardship. While management teams are responsible for operationalising the Compass, boards must play a role to not only nudge the management in this direction but also be mindful of the Compass in all their conversations. They must ensure that all decisions the board takes agree with the stewardship values. They must further partner with the executive team to develop and maintain internal systems, structures and culture to ensure seamless alignment of all enterprise activities with the Compass. Finally, they should hold the management team accountable for maintaining and strengthening a culture of steward leadership throughout the organisation.
