Sustainability Expertise Recommended within the Board
The practice of corporate sustainability is moving beyond ad hoc, opportunistic efforts to embrace a more holistic, strategic approach that pursues transformational goals, frequently through partnerships that engage multiple entities, including competitors, suppliers, governments, and NGOs. So says a new global study by MIT Sloan Management Review (MIT SMR), The Boston Consulting Group (BCG) and the UN Global Compact. The study results are being released today in a report titled Joining Forces: Collaboration and Leadership for Sustainability.
On the basis of a survey of more than 3,795 executives and managers from 113 countries, the study found that 61 percent of executives whose companies participated in sustainability-related partnerships view these collaborations as quite or very successful. But collaboration is not yet common practice. While 90 percent of respondents recognize the importance of sustainability collaboration—only 47 percent of respondents reported that their companies are 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,” said coauthor David Kiron, executive editor of MIT SMR. “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.”
Sustainability collaborations often bring together diverse stakeholders, and the research suggests that there is a learning curve for companies: the more collaborations a respondent’s company has engaged in, the more likely respondents are to rate their collaborations as successful. For example, among respondents whose organizations currently have one to three sustainability collaborations, 43 percent say that these collaborative ventures are very or quite successful. Of those that have engaged in more than 50, 95 percent report the same degree of success.
The study also looked at board engagement as a driver of sustainability success. Overall, 86 percent of respondents believe that the board of directors should play a strong role in driving their company’s sustainability efforts. But only 42 percent of respondents see their boards as moderately or more engaged with the company’s sustainability agenda. This disconnect affects performance: in companies whose boards are perceived as active supporters, 67 percent of respondents rate collaborations as very or quite successful. In companies whose boards are not engaged, the reported rate of success is less than half that.
“We identified several ways to overcome the barriers to board participation,” said coauthor Knut Haanaes, a Geneva-based senior partner at BCG. . “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 maximizing only of shareholder financial value.”
As a whole, the study finds progress in companies making the fundamental shift in how they organize themselves and how their boards of directors act to address the profound challenges and risks that issues of sustainability present. But it also indicates that many business leaders have some distance to go to understand that the path to sustainability success is best traveled with others.
Coauthor Georg Kell, executive director of the UN Global Compact, aptly sums it up: “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. Many of these challenges—such as corruption, climate change, and discrimination—cannot be tackled by a single organization, 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.”
The UN Global Compact is a call to companies everywhere to voluntarily align their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment, and anticorruption, and to take action in support of UN goals and issues. Endorsed by chief executives, the UN Global Compact is a leadership platform for the development, implementation, and disclosure of responsible corporate policies and practices.
Join the authors of the sustainability research report on January 28 at 11:00am ET for a free, live webinar and Q&A. Register for the free webinar now at http://mitsmr.com/SUWebinar15.
