Creating A Sustainability-Savvy Board
From both a risk and opportunity perspective, boards must ensure they fully engage with the impact of sustainability: Board members and senior leaders alike are challenged to take bolder and more transformative action. A recent study revealed that nearly 75% of European board directors believe that ignoring sustainability will affect their organisations’ ability to create long-term value. However, only 30% believe that ‘everyone on the board has a good understanding of sustainability and its place in strategy,’ and just over half state that ‘the board sees a solid business case in sustainability’.
In this podcast, Dr Sabine Dembkowski talks with Trista Bridges, Founder of Read the Air, about creating a sustainability-savvy board.
Trista Bridges is a highly regarded senior advisor, with extensive experience in strategy execution topics ranging from marketing and corporate strategy to organisational training and development. Trista has worked across a broad spectrum of industries, including Life Sciences, FMCG, Digital Technology, and Financial Services, and geographies from Europe to the Americas and Asia. She is a firm believer in the importance of incorporating sustainability in business strategy and operations, an area of increasing focus for her clients.
Some of the key takeaways of the conversation include:
“Millenials and others are asking why companies can’t make profits and do better for society”
Trista discusses how many things have changed over the last ten to fifteen years, and how some have felt that this has caused inequality and a strain on the system. She also argues that businesses have in effect been asked to step up into a role that previously might have been filled by governments.
In addition, younger generations and investors alike are looking at how businesses can make profits, while at the same time still work in a sustainable way. This has resulted in a shift, with governments looking at more regulation and taking more companies to account.
“Companies need to identify what we call “materialities” – This depends on the industry you’re in, sector, country etc.”
Trista acknowledges that sustainability and ESG are both broad topics. She cites the food industry and issues around healthy food as an example, where companies need to look at their product portfolio and find the right way to respond to these issues. She also knows this can be an issue for businesses- for example Japanese companies looking to attract outside foreign capital may have to look at changing their approach toward ESG issues, in order to bring in outside investors.
Data privacy is another example of a major issue companies have to deal with, specifically in the technology sector. Trista cites Meta (formerly Facebook) as a tech company that has received some pushback and negative press, due to their handling of data.
“90 per cent of investors place more emphasis since the start of the COVID-19 pandemic on ESG performance in terms of how they invest” 1
Trista acknowledges that for older generations (even those who entered the workforce in the nineties) these issues were not as prevalent. Recent surveys have shown that a significant number of investors place emphasis on ESG, as do a majority of analysts when it comes to recommending companies.
“ESG is not a nice thing to have, it’s a necessity for the company”
Trista believes it is important that boards look at where their priorities are in terms of sustainability and ESG, and whether everyone’s thoughts on these topics line up with each other. Furthermore, companies should also be looking at what their competitors are doing, and how they should be responding to that.
“There needs to be ESG training within board training… …The support has to start at the top”
Trista also stresses the importance of incorporating ESG training into an overall board training program. Another option she provides is the idea of having someone specifically designated on the board to oversee ESG, and to potentially educate other members of the board, as well as reaching out to outside experts if necessary.
She emphasises the point that ESG and other issues must be a mandate for the company, and that the messaging effectively starts at the top. While there can be some movement from lower parts of the business, a board can make a CEO accountable, and formulate a strategy with sustainability and ESG as part of it.
“If you are serious about something, you resource it”
One example she uses is net-zero targets. Companies may invest in marketing, accounting and so forth but may not put sufficient resources into issues such as making a business more sustainable. Trista believes this should be tied with a managerial role – rewarding when targets are hit, but equally penalising if not acting on issues as they should. Most importantly, she emphasises that this is a long-term strategy, focusing on the next 15 to 20 years as opposed to quarter to quarter.
Trista refers to Dutch company DSM, a company that went from being a mining company to health and nutrition company. She explains how the company approached sustainability as an opportunity as opposed to a cost, for example focusing on promoting nutritional products in Rwanda as the nation becomes more prosperous.
The three top takeaways from our conversation are:
- Boards need to look at where they are in terms of sustainability. What do they know? What do they not know? How can boards become more savvy about this topic?
- What is material for your company? Understand what is going on in terms of sustainability, ESG and other issues – there are risks but there are also opportunities.
- Does the company have a strategy in addition to their targets? Companies need to know how they are going to execute their strategy and have accountability in place
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1 “Is your ESG data unlocking long-term value?”, Mathew Nelson, EY Oceania Chief Sustainability Officer, 3 Nov 2021