Board Engagement Critical to Sustainability Success

Business executives insist that the board is a key driver of sustainability success yet the majority or boards are still not even moderately engaged in company sustainability efforts, according to a new study.

Joining Forces: Collaboration and Leadership for Sustainability is based on a survey by MIT Sloan Management Review (MIT SMR), global management consulting firm The Boston Consulting Group (BCG) and the UN Global Compact of more than 3,795 executives and managers from 113 countries, including Australia.

The report found that 86 percent of executives believed the board of directors should play a strong role in driving their company’s sustainability efforts – yet only 42 percent of respondents saw their boards to be at least moderately engaged with the company’s sustainability agenda.

Study co-author Knut Haanaes, a Geneva-based senior partner at BCG, said several ways to overcome the barriers to board participation had been identified.

“They include appointing members with sustainability expertise, creating an external advisory board, integrating sustainability into the duties of the overall board and established board committees, and establishing a broader vision of the board as steward of all stakeholders and managers of risk versus the traditional maximising of shareholder financial value,” he said.

The report also found that the practice of corporate sustainability is moving beyond ad-hoc efforts to embrace a more strategic approach that pursues transformational goals – frequently through partnerships that engage multiple entities, including competitors, suppliers, governments, and NGOs.

According to the report, some 90 percent of executives agree that businesses need to collaborate to address the sustainability challenges they face, while 61 percent of executives whose companies participated in sustainability-related partnerships viewed those collaborations as quite or very successful.

But collaboration was not yet common practice, with only 47 percent of respondents reporting that their companies were actively collaborating.

“While collaboration is not yet the norm, among those who are doing it, we are increasingly seeing a focus on transformational, strategic results,” Executive Editor of MIT SMR and study co-author,David Kiron, said.

“More than half of reported collaborations aspire to fundamentally change the market in which the business operates, so sustainability efforts are much less likely to be discrete projects and much more likely to engage a company’s entire ecosystem—from suppliers and customers to governments and academic institutions.”

According to the report, companies with boards perceived as active sustainability supporters had a higher rate of success in collaborations. 67 percent of respondents with engaged boards rated collaborations as very or quite successful, while in companies whose boards were not engaged, the reported rate of success was less than half of that.

The research suggested that there was also a learning curve for companies, where the more collaborations a respondent’s company has engaged in, the more likely respondents were to rate their collaborations as successful.

“With commercial activities and investments reaching every corner of the earth, companies increasingly face complex uncertainties and risks related to social, environmental, and governance issues,” Executive Director of the UN Global Compact and study co-author, Georg Kell said.

“Many of these challenges – such as corruption, climate change, and discrimination – cannot be tackled by a single organisation, making it critical for companies to join together as never before. Companies are starting to see that when they provide a collective voice, share risks, and pool resources, they can deliver transformative solutions that benefit both business and society.”

For the sixth consecutive year, MIT Sloan Management Review, in partnership with The Boston Consulting Group (BCG), conducted the global survey.

This year, the UN Global Compact joined the partnership for the first time.

Download a copy of the full report.