Corporate governance has long advanced beyond compliance and governance matters to include sustainability issues and other non-financial performance indices. According to the UN Brundtland Commission, Sustainable development is that which meets the needs of the present without compromising the ability of future generations to meet their own needs. The concept of sustainability exists because organisations possess more responsibilities that transcend the financial implications of their activities and extends to the social and environmental implications of the same.
In today’s world, organisations are considered as corporate citizens possessing rights and duties within their resident community which emphasizes the need for good corporate citizenship and responsibility. organisations have also come to realise that integrating sustainability into their businesses creates value, increases productivity and enhances brand reputation.
Principle 26 of the Nigerian Code of Corporate Governance (NCCG 2018) states that paying attention to sustainability issues guarantees successful long-term business performance and projects the company as a responsible corporate citizen that contributes to economic development. In complying with this principle, the Board is expected to exemplify the sustainability culture and ensure that it spreads across all levels of the organisation including other stakeholder groups such as the investors, suppliers and the local community. The Board should also insist that executives and key employees understand the emerging trends in corporate sustainability governance.
Understanding stakeholder groups is crucial to sustainability. A stakeholder is any person that can be reasonably expected to be affected by an organisation’s activities, or that can affect the ability of the organisation to effectively implement its objectives. Stakeholders generally include suppliers, shareholders, customers, the community, trade unions, employees, Government, investors, regulators and other social stakeholders. An organisation must carefully identify its stakeholders and those issues that matter to each category of stakeholder and then develop strategies to respond to those issues.
According to a Bloomberg report, sustainability investments grew by about 25 percent from $1.8 trillion in 2015 to $2.3 trillion in 2017, thereby accounting for about one-quarter of all professionally managed investments globally. Stock exchanges and financial regulators all over the world are also paying more attention as sustainability disclosure mechanisms are being added to listing requirements.
The NCCG Code requires that the Board establish policies and practices regarding its social, ethical, safety, working conditions, health and environmental responsibilities as well as policies that address corruption. These policies are required to include the company’s business principles and practices towards achieving sustainability; its management of safety issues within the workplace; and the plan and strategy for addressing and managing the impact of serious diseases on its employees and their families. The Board is also required to monitor the implementation of sustainability policies and report on the extent of compliance with the policies.
Recognised barriers to integrating sustainability within the organisation include competing internal commitments, short term focus on profit over long term value and benefits, resource and budgetary limitations, competing stakeholder interests. Regardless of these constraints, integrating sustainability within an organisation may be achieved by identifying the key issues, developing a strategy around the objective, establishing governance and accountability parameters, setting targets and action plans, and emplacing a monitoring, reporting, and assessment system. The benefits of integrating sustainability include fostering innovation, cost savings, and brand differentiation, improved market positioning, improved relations with stakeholders, and compliance with the relevant laws.
The role of accountability in relation to issues of sustainability is very crucial which further emphasizes the need to embrace Sustainability Reporting. Sustainability Reporting is an organisation’s practice of reporting publicly on its economic, environmental and social impacts and its contributions toward sustainable development goals.
Clearly, reporting the impact of an organisation’s activities and operations on its environment is just as important as reporting on its financial performance. It is also important to consider appropriate strategies for the collation of information as well as the end-users of such information. Any reporting on sustainability initiatives would have limited effect where the information provided is erroneous, outdated or irrelevant.
Organisations must regularly depict an innovative and responsive attitude towards the future by demonstrating concern for Sustainability in line with the objectives of all concerned stakeholders, as the survival of any organisation depends on this. A Sustainability conscious organisation is not passive about any of its activities. Its intentionality towards all activities as well as its relationship with other stakeholders distinguishes it from all other organisations that portray indifference.
Bisi Adeyemi is the Managing Director, DCSL Corporate Services Limited. Kindly forward comment(s) and reaction(s) to [email protected]. DCSL provides Governance Advisory, Corporate Restructuring & Board Evaluation, Board & Senior Management Training, Retreats & Strategy Sessions, Executive Talent Recruitment, HR Outsourcing, Company Secretarial services.
