Today’s corporations, faced with the extraordinary challenges of global climate change, water scarcity and workplace inequality, are at a crossroads. They can take proactive steps to adapt to pressing environmental and social issues – the two core categories of “sustainability” – or they can risk being left behind.
Sustainability is a critical business issue that all companies must focus on. Wall Street research, academic papers, corporate reports and trends from major investors all underscore the same message: companies that adopt sustainable practices deliver superior financial results and can face the future with more resilience.
Corporate boards must take a leading role in championing sustainability across the entire business enterprise. More than executives and other employees, members of corporate boards are responsible for ensuring long-term shareholder success and overall value creation. Directors have a duty and a mandate to promote sustainability priorities in corporate strategy, risk management and performance in order to meet this fiduciary responsibility.
Yet, while there has been a measurable uptick in director engagement on sustainability issues, it is still largely the exception rather than the rule among most companies. A 2014 Ceres analysis of 600 of the largest publicly traded U.S. companies found that only 32 percent oversee sustainability at the board level. Additionally, except in the case of a few leading companies, it is often unclear whether board sustainability oversight is achieving meaningful performance improvements.
Building on interviews conducted with dozens of corporate directors, senior corporate leaders and governance experts, this report identifies key strategies for effective board engagement that can produce tangible environmental and social impacts. Specifically, the report recommends two inter-related approaches for weaving sustainability more deeply across board functions: 1) Integrating sustainability into board governance systems, and 2) Integrating sustainability into board actions. By combining robust systems and meaningful actions, boards will have a far better chance of achieving substantive performance improvements.