In an earlier post, SR Inc introduced the six key components for an effective Sustainability Strategy for Corporate Operations and Real Estate that we have advised leading companies and real estate investors on for more than six years. That post also examined the first component, “Vision” in some detail. Specifically, that post examined why it is appropriate and advantageous for a for-profit company to develop a CEO-endorsed “Vision” for more sustainable business – a “Vision” that clearly communicates that a more sustainable approach to business is one that will help the company drive a growing profit margin and develop innovations of growing importance in an increasingly global and resource-constrained economy.
An outstanding “Vision” of needed innovations and sustainable profits in a changing world, however, cannot be effectively implemented without shrewd and effective Governance. In this post, we will examine effective Governance structures. Specifically, we will introduce some aspects of Governance for Sustainability that we have seen and advised on that have helped companies bring coherency, accountability and effectiveness to previously disparate sustainability initiatives.
The most effective Governance structure will obviously vary in different companies and, in particular, in different industries. In this post we will assume the company is a for-profit service company without a fully staffed “Sustainability” function and with perhaps only a small Corporate Social Responsibility (“CSR”) function with one to three FTEs focused on charitable activities and community engagement.
In this context, several management best practices are regularly very effective. SR Inc can, of course, consult in detail on each but it may well advance SR Inc and our Member-Clients’ shared interests to share with the public several practices that regularly prove effective in establishing or improving a system of governance for more sustainable operations. These include:
An Executive Committee of the Sustainability Committee & Task Forces
SR Inc has repeatedly seen that it is effective for a small Executive Committee (often as small as three executives) to propose items that the larger Sustainability Committee approves or disapproves. This technique of having an Executive Committee propose and educate the much larger Sustainability Committee for the approval of important items has often proved critically important to engage the right executives and internal stakeholders through the Sustainability Committee.
To most effectively play the role as the “prime mover” on sustainability issues (hopefully with but even without a Chief Sustainability Officer (CSO)), the Sustainability Executive Committee needs to be comprised of individuals who are personally motivated to help the company approach business in a more sustainable manner. Because they are personally motivated, the Executive Committee does not need to be publically promoted and can promote instead the Sustainability Committee. Optimally, the core team or Executive Committee will have five or fewer executives and include a C-Suite Executive Sponsor.
SBER Member-Clients with and without full-time Chief Sustainability Officers have proven effective in creating and implementing impressive Sustainability Strategies, but those without C-Level Sustainability Executives cannot reasonably be expected to succeed over time without an impressive core team or “Executive Committee” of the Sustainability Committee.
Once a governance structure takes shape, the Sustainability Committee can ask executives to form specialized and even task-specific, cross-departmental Sustainability Groups or Task Forces. These are regularly best prepared to determine how to partner with outside experts and support. Often, their first assignment is to determine the costs and benefits of something the Sustainability Committee is interested in examining for potential enterprise-wide adoption.
Involving an Often Receptive C-Suite
“Corporate Sustainability” offers a framing of management issues – especially the need for continuous optimization and continuous innovation – that has proven attractive and constructively engaging to the most sought after customers, employees, long-term investors and regulators.1, 2 Perhaps for these reasons, Corporate Sustainability has also proven outstandingly popular with the Global C-Suite.3 Consequently, a C-Level executive sponsor on a Sustainability Executive Committee can analyze whether opportunities identified by the Sustainability Committee will receive C-Suite and even Board Level backing.
Leveraging Governance to Develop Effective Policies
Winning senior management recognition and resources is, of course, just the beginning of effecting positive change. Mature and effective Sustainability Strategies regularly include the development of broadly accepted and enforced Sustainability Policies. Many innovative and fast growing Sustainable Business & Enterprise Roundtable (SBER) Member-Clients – especially global IT companies experiencing phenomenal global growth – are wary of global sustainability policies. However, most SBER Member-Clients – including some of these companies – are interested in Sustainability Policies developed by other companies in their industry. All well-written and applied Sustainability Policies will enable needed variation in implementation to respect different business, cultural and management considerations.
Generally, companies with impressively successful Sustainability Strategies regularly do establish a formal set of policies to support sustainability. These go beyond simple commitment statements or non-binding “guidelines.” They are instead clearly articulated requirements, and in fully mature programs, success in compliance impacts executive and non-executive performance assessments through-out the company. This makes allowing for appropriate regional and business unit variations especially important. Below is a sample hierarchy of interlocking Sustainability concerns that integrate EHS and Procurement under the banner of corporate sustainability.
Regularly HR, Procurement and/or legal departments are responsible for the development and maintenance of most enforced sustainability related policies. However, many leading companies have not yet established formal sustainability policies but rather have simply adopted guidelines that encompass a wide range of sustainability initiatives. While unenforceable guidelines are not an optimal means for governing overarching sustainability issues, they can be effective in managing specific sustainability initiatives that are defined by great variability related to geography, culture, vendors, and other factors – e.g., when policies are not practical due to fragmented lines of command across several newly acquired businesses.
The most effective governance and policies will necessarily vary by company and most substantially by industry. SBER clients interested in learning more about anything mentioned in this post should contact their SBER Advisor. Non-member companies interested in learning more may reach out to SR Inc for courtesy Executive Guidance and member briefings. We look forward to discussing in an upcoming post the SBER Executive Guidance and tools related to the third component of a highly effective Sustainability Strategy: “Strategy.”
1 https://hbr.org/2010/05/the-sustainability-imperative/ar/1
2 https://hbr.org/2009/09/why-sustainability-is-now-the-key-driver-of-innovation/
