It is clear why sustainability matters. Added to its obvious importance are the climate action plans rolled out by governments, the global sustainability initiatives lead by agencies such as the UN and NGOs like the World Economic Forum. There is also the increased emphasis on sustainability among deciders of capital allocation, including investors, financiers, grant providers and donors, and the rising environmental awareness in society, which expects higher standards of ethics and governance from institutions.
If, as a director, you occasionally feel overwhelmed by the volume of information regarding sustainability, then you are not alone. If you wonder how sustainability is relevant to your role and what difference you can make, take assurance from Socrates that “wonder is the beginning of wisdom”.
How Sustainability is Relevant to Your Organisation
Whatever an organisation does, regardless of its size, sustainability will impact:
- its legal and regulatory requirements,
- how it provides a service or produces a product,
- whether it retains or attracts talent,
- whether it is attractive to customers, or
- whether it is perceived as a viable prospect for banks or investors.
The fiduciary duties of directors require them to act in the best interests of the organisation and have regard to other stakeholders. Addressing sustainability issues and looking after the organisation’s business are clearly relevant to these duties.
Sustainability may be the ultimate disrupter for businesses. Even if an organisation does nothing to address sustainability issues it will still be impacted by them. For example;
- What is the risk of a change in regulations challenging current business models?
- What is the risk of more sustainable technological advancements displacing current products, service offerings or production processes?
- To what extent can carbon tax increases be passed on to the consumer?
- What impact will phasing out of oil and gas have on residual values of assets or cost of replacement in the future?
Standing still is not an option if an organisation wants to manage the impact of sustainability. Directors, acting as the mind and will of an organisation, have a key role to ensure it is appropriately identifying and responding to relevant sustainability risks.
How You Can Make a Difference
If you are a director or a member of a board sub-committee wanting to raise the issue of sustainability (even if this is not currently seen as a priority), consider the following approach:
- Get informed: Find out more about the type of sustainability issues that impact your industry. Sustainability will affect regulatory requirements, consumer demand, availability of resources and all the necessary components of the ability to do business. You do not have to become an expert on sustainability, but a little knowledge or awareness can prompt the right questions.
- Find Allies: Engage with other board members. Discuss how sustainability impacts the business and how the board might address the issues. You may find that you have more support than you expect.
- Be Honest: It is important to be pragmatic and constructive as to the reasons why the organisation should address sustainability and how it does so. There may be some immediate measures the organisation can take (‘quick wins’), but more substantive measures may be required to be taken to achieve lasting long-term benefits.
- Collaborate: Lasting change cannot be achieved alone. If your organisation is not clear on what to do or what direction to take in relation to sustainability, consider collaborating with other organisations on similar journeys.
- Be curious: Ask questions about sustainability, explore alternatives and respectfully challenge traditional assumptions. Invite others to discuss the issues and embed sustainability objectives in the organisation’s strategy. Questions beginning with ‘What if?’, ‘How?’ or ‘Could we?’ will spark curiosity and give rise to more possibilities and sustainable solutions.
Sustainability cannot be achieved alone. Strategy and know-how shared among organisations and individuals will inform, create awareness and provide confidence for the journey ahead. Directors must be confident to ask advice and seek help from others. If we agree that we all have a stake in sustainability, then we all have a stake in finding solutions to the key risks of our time.
Chartered Accountants Ireland’s Governance Conference 2021 focuses on how boards can embed sustainability in organisations and takes place online on 22 April 2021 from 9:30am.
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