Traditionally, in most organisations the Board of Directors focuses on the governance, viability, survival, strategy and financial status of the organisation. For many years Boards have ignored sustainability as a secondary issue to the financial performance of the business. However, in the past decade there has been a paradigm shift towards environmentally and socially sensitive Boards.
Pressure from regulators, investors and civil society has made Boards think twice about their governance role. In order to achieve the highest level of commitment and execution modern Boards are beginning to establish specific committees that focus on sustainable development. The fear of share prices tumbling due to reputational issues caused by spillages of hazardous chemicals and other environmental catastrophes makes board oversight on sustainability an imperative.
Dented reputation, mounting pressures from stakeholders and high operational costs have resulted in Boards beginning to take sustainable development seriously. CEOs must therefore be prepared to share with their Boards the progress being made at operational level to promote sustainability within the operations of the organisation. Gone are the days where environmental, safety, health, water, energy, stakeholder relations, social accountability and waste management issues were swept under the carpet by corporate leaders.
Environmental issues and social governance topics have become make or break for companies, such that there is an increased interest in managing them. Boards have started to realise that the company reputation can be destroyed in one day simply because there is breaking news about the organisation’s pollution endeavours.
The rise of environmental activism, puts companies which are not socially responsible on the spotlight for public shame. Trust lost may never be recovered from key stakeholders. Knowing that successful business hinges on good relations and managing stakeholder interests, Boards of Directors have tightened the noose. Consequently greater demands are being put on CEOs, Managing Directors, General Managers and Executives to prove to the Board that sustainability is being effectively managed.
