Harnessing the power of boards to embed sustainability

"Nose in. Fingers out." It's a phrase that indicates the level of engagement and intervention when a board is fit for purpose. Board members are expected to ask insightful questions, pressure test ideas, and propel agendas without the hands-on management of day-to-day business activities.

Yet when it comes to sustainability goals, CEOs and their boards are falling short. For example, while a recent survey showed that 98% of CEOs feel it is part of their role to make their business sustainable, only 34% are reducing their total Scope 3 emissions.

How can board members fulfill their fiduciary duties, “get smart” on what sustainability and ESG mean to their organization, and help embed sustainability into the organization?

Leaning in

Leading companies receive input from their management team and board during enterprise risk and sustainability materiality assessments. The materiality assessment surveys a wide variety of stakeholders and highlights where the company has its most significant impacts on the economy, environment, and people - from net zero goals to human rights, to cyber or board composition.

Board members can lean in on these assessments, transitioning from management “informing the board,” to the board members being active participants in the assessment process. This can help their ability to fully understand the positive or negative impacts the company’s operations, policies, and processes are having on others. For instance, a company can use its board’s expertise as a competitive advantage by interviewing and surveying board members during the identification and prioritization stages of the assessment process.

Empower your people

Research indicates that employees desire to have a meaningful impact by working for an organization that shares their values; however, a limited number of employees possess a comprehensive understanding of the company's sustainability commitments, hindering their ability to embed new behaviors into their daily work.

Boards can help accelerate the transition to a culture of sustainability by shifting the ownership of sustainability commitments from the C-suite into the day-to-day operations of the workforce. One way this can be accomplished is through changes to the operating model.  For instance, a company can create a role that is responsible for evaluating the impact on carbon during the decision-making process.

Identify the right skills

Once the company has created and approved the sustainability goals aligned with their strategy, management will need to create a plan to reach the goals in the agreed upon time. Board members will need to understand how the company will reach its goals and the skills and capabilities needed. Where to start?

1. Define the skills necessary to meet your overall sustainability goals and annual targets.
   
   
2. Align the bespoke sustainability skills to job levels and roles across the business.
   
   
3. Perform a skills gap assessment to identify the skills you have, the skills you need, and the gap between them.
   
   
4. Determine where reskilling and upskilling are necessary versus going outside of the organization to ensure that the workforce has the capabilities to help the organization reach its commitments.

Board members can help companies transition from traditional job descriptions, skills, and capabilities to sustainability-inclusive skills and capabilities aligned with the sustainability goals and commitments of the organization. This will allow for the identification of where the organization can upskill its current workforce, will need to hire new skills or utilize technology or adaptive workforce to enhance the business model. One financial services company, for example, has begun to upskill its workforce on sustainability using learning pathways for basic, intermediate and advanced levels of sustainability knowledge.

Invest for success

Empowering people to own the company’s sustainability goals will require tools for success, which often includes implementing new technologies. When companies invest in data, technology, and people, they can gain up to an 11% premium in top-line productivity. Today, the 5% of large, global organizations that are investing in all three – people, data, and technology – sit at the top quartile in their respective industries. CEOs are focused on technology for sustainability advancements, as 72% of CEOs are digitizing their business processes and 55% of CEOs are enhancing sustainability data collection capabilities across the value chain.

Boards can help the company transition from siloed investments in people, data, and technology across the organization to a holistic investing approach to combine sustainability-related skills and capabilities of people with the knowledge from the data enabled by the tool of technology to accelerate growth for the organization.

Tie pay to purpose

Boards are looking to their C-suite to deliver solutions that will align with their sustainability goals. Purposeful leadership across the C-suite is critical to creating a strong culture aligned with the company’s values, attracting and retaining talent, and shaping sustainable organizations that can stand the test of time. Compensation programs should be aligned with both the company’s financial performance, and the organization’s success in meeting their annual sustainability targets – incentivizing the workforce to meet all the goals of the organization.

Today, only 34% of CEOs are linking leadership’s remuneration to sustainability targets. Now is the time to shift mindsets from treating sustainability as a moral choice to a source of enduring competitive advantage – focusing on two measurements used by stakeholders to evaluate companies: financial performance and sustainability impact.

Boards should oversee the embedding of sustainability goals into all levels of the organization, aligning the company rewards program with financial performance and sustainability impact. For example, companies could embed diversity, equity and inclusion (DEI) goals into managers' individual performance-based goals, replacing a percentage of revenue or other goals with their business unit's DEI goals.

Moving the needle

Three ways boards can help companies advance the company’s sustainability goals:

1. Ownership and accountability – Understand how the sustainability goals are spread across the C-suite and throughout the organization. Who is responsible and how are short- and long-term executive and employee incentives aligned with the sustainability goals?
   
   
2. Allocation – Discuss where funding for both people and budget has been allocated to support the people, process and technology changes necessary to achieve the sustainability goals. Who has the responsibility and funding for employee training needed to reach the company goals? Where is the funding for new technology needed for tracking and reporting on the goals?
   
   
3. Succession planning – Review the board composition and skills matrix to determine if the appropriate skills and competencies to oversee the company strategy that includes the sustainability goals exist. Identify if board education is necessary from within the company, a third party to enhance board members’ perspective and knowledge, or if new skills should be added to the board.

Embedding sustainability

Want to learn more about how your board can lean in and help embed sustainability in their organization?  Reach out to Danetta Bland, Managing Director – Sustainable Leadership and Organization Lead.

This blog is part of a series discussing how leaders can embed sustainability into different aspects of their organizations to create value and impact. The other topics are:

• Minting a sustainable future
• Three steps to embed sustainability in strategy
• Energy Efficiency – where cost and sustainability first meet
• Rebalancing the books on nature and biodiversity
• So long Black Friday: Reinventing consumption
• Measuring up: Achieving resilience through ESG
• Don’t forget the “S”
• Clearing the hurdle: Scope 3 emissions
• Making generative AI green