- …implementing sustainability the role of leadership
A great business is said to always have morals. The symbiotic relationship between corporate institutions and their environment has to be managed through an effective compliance management framework and policies. Meanwhile, if ever compliance issues would be adhered to and managed well, the key factor of sustainable leadership impact and role are highly imperative and crucial.
Leadership that is for the greater good provide clear and compelling direction, momentum, set new policy guides and targets, ensure the provision of resources for the attainment of company vision. Whilst ESG compliance is the latest topical subject, it should not be anything new to an organization.
The elements it is looking at already exist within most organizations and as such calling for proper management and effective compliance framework, systems through greater leadership support is the clamoring call. The term Social looks at effective people management and community engagement.
Governance is around risk management and effective corporate structure whiles Environment discusses the understanding and management of environmental impacts. The challenge is consolidating information in a structured way to deliver the best result for the companies good.
As already intimated in the previous series, the current level of demand for ESG leadership talent is unsurpassed and unrelenting. ESG is now part of investment requirements and it describes the performance of investment and fund portfolios relatively to using environment, social and governance as critical benchmarks.
ESG analysis is said to provide insight into the long-term prospects of companies even as the quality of portfolios are measured against ESG factors and are reported to shareholders. Again, investors often find new market opportunities with companies that place the management of ESG factors at the core of its business.
By these fundamental reasons, effective leadership that can drive critical sustainability efforts and management must remain the key issue for topical discussion and deliberation by leadership of businesses. Hence, this series would try to look into sustainable issues relative to leadership mindset and efforts for compliance. Let’s talk sustainable leadership and the impact on ESG compliance effort.
What is Sustainability?
The term sustainability is considered as meeting the needs of the present without compromising the ability of future generations to meet their own needs. Inherent to sustainability issues are the ideas that people should not degrade the environment for short-term profits or gains.
It is obviously necessary to admit that for life to exist, there is the need to build a more sustainable world through ethical, responsible and accountable business to protect it. The noble effort to be environmentally and socially responsible calls for a sustainable leadership effort and the conscientious determination to impact the broader long-term goal of building a more sustainable world through specific processes, methods and frameworks to guide the conducts of businesses.
That notwithstanding, sustainable leadership and management pursuits must be seen as important and necessary to enhance the developmental and promotional agenda of a better global world.
Having said that, sustainable leadership seeks to define the principle of mindful actions and behaviors that embrace a global world-view to recognize the connection between the planet and humanity, thereby effecting positive environmental and social change through personal and organization choices.
Sustainable leadership ensures leaders of businesses manage companies with environment, society and long-term sustainable development goals in mind. In view of addressing people and process management under sustainability effort, leadership focuses much attention to pursue innovation, detail guides to prevent problems, promote speed and engage steps that promote understanding of sustainability visions, support structures and collaboration.
The approach to managing people and environment sustainably borders on the issues of employees’ engagement, public communication and reporting. On the other hand, Process and environment leadership drives all initiatives to encompass leadership, process and systems alignment, systems thinking and effective supply chains.
The summary concern for sustainable leadership is the growing evidence that sustainable practices must result in improved financial performance and think long-term growth, profitability, customer loyalty and stewardship.
And Compliance?
It is noteworthy that, all compliance issues are effectively carried out or handled through great leadership support and readiness. Compliance issues are typically centered on overseeing the investigation, adherence to and the management of all critical company rules, policy, standard, specification and law.
A good governance framework must have a well-thought out plan that include the right policies and procedures to ensure business compliance. However, the emphasis is that, compliance is linked to corporate governance which must become the framework of rules, regulations and practices under which the company operates. The main focus of corporate governance therefore is to ensure compliance with the law, accountability, fairness and transparency in company’s relationship with its major stakeholders.
Again, compliance is considered the hub of activity affecting ESG priorities. We saw in part 1 of our ESG series that, ESG compliance is a set of standards and objectives that attempt to measure a company’s impact on the environment, its people including employees, community members and laborers and how well the company is managed.
Compliance program is designed to build a sustainable governance approach that also avoids predictable surprises of repeated compliance deficiencies. The bottom line is that a corporate compliance program is in the business of delivering protection from legal and regulatory liability while it strives also to promote and impact the company as a trusted business leader.
To talk about compliance is to speak about transparency as a major pillar. Transparency in good governance and compliance subject plays key impact and role for effective implementation and results. Transparency makes good governance and Compliance policy and procedures better understood, appreciated and receive support and commitment by all stakeholders.
Think for instance most functions in compliance-due diligence. Whether compliance is conducting due diligence on a third party, providing certifications to clients or testing the organizations compliance with sustainability claims or simply documenting adherence to government standards, transparency is of great essence and key.
CSR vs ESG as Sustainability issues:
Corporate social responsibility is a form of self-regulation ensuring a business actions have a positive impact on the environment, consumers, employees, communities and the public sphere. ESG term on the other hand is used by investors to evaluate a business corporate behavior and determine the future of its financial performance.
Whereas CSR activities make a business accountable, ESG benchmarks make a business efforts measurable. ESG is measured, quantifiable and criteria-led, allowing business to fully integrate better environmental, social and governance strategies into the business DNA.
CSR is the lighter touch of the social impact which has been add on to a business purpose and direction. It helps businesses say what they are doing well without having data to back up its claims or mention the areas they failed. Nonetheless, data suggest that businesses with robust ESG practices displayed a lower cost of capital, lower volatility and fewer instances of bribery, corruption and fraud over certain time periods.
CSR activities include strategic business management concept and charity, sponsorships or philanthropy. With regards to ESG, investors are prepared to invest in businesses that clearly demonstrate their ESG impact. For these reasons companies ought to look into the future and prepare for being ESG compliant.
Building a Social Case for ESG Sustainability and Compliance:
The essence of Identifying changes in stakeholder social well-being relative to the implementation of sustainability principles in any organization embraces coherence, integration actualization, contribution and acceptance. The social impact guide for compliance include governance, human rights, knowledge management, product design and built environment, equity and ethics, philanthropy and responsibility.
It is well known fact that, ESG initiatives are an important area of growth for companies and that, holding companies responsible and accountable for their management of environmental, social and governance concerns is a noble undertaking.
In spite of the numerous challenges leadership confronts with regards to ESG in the areas of upfront cost, aligning ESG with other company priorities, readiness of companies to integrate their operations to align with ESG structures, identifying the right standards and metrics for consistent measurement, cultural business norms is certainly costly and uneasy.
Meanwhile, ESG compliance presents its own benefits in mitigating risk of litigations, long term value creation, attract talent, helping companies make better informed business decisions, better positioning companies to proactively manage risks, building trust with stakeholders and shareholders, providing increased visibility into planning, identification and management of operational risks.
ESG certainly can help bolster the bottom line. This all-encompassing model of corporate sustainability deals with both the external and internal context, business context and human and financial resources of the business. The outcome of this expectations through engineered processes promote sustainable long term corporate financial performance or gains.
Sustainability and leadership Efforts:
To speak leadership and corporate sustainability is to talk about strategy, structure, systems, programs and actions. Sustainability must fully be integrated into all aspects of corporate strategy such that, companies cannot have a separate sustainability strategy and expect to be truly impactful.
To better understand the role of leadership in sustainable issues, is to essentially engage board level-talent, the recruitment of practices that leverage the deep expertise in sustainable leadership and corporate governance practices. Evidence emerged from research suggests that sustainability issues are a matter for board of directors concern and that those that have been successful intimate clearly the steps or roadmap toward progress, touching on issues as wide ranging as board culture, risk management and corporate purpose.
While the corporate strategy is developed by the executive team, the board needs to be engaged and aligned throughout the entire process and ensure that sustainability is always at the front and center of the issues. There must be a holistic approach to capture both the potential benefits of being more sustainable as well as the risk. From risk management perspectives, the cost of non-conformance with sustainability standards and leadership awareness is just going to be higher and higher.
The call for sustainable leadership has seen in clear example the efforts by some world leaders in dealing with climate change. In the words of US secretary of state, he intimated that, the chance to shape the world’s climate future in a way that reflects the United States interest and values is of great essence to them.
Again the Biden’s administration has also argued for putting the climate crisis at the forefront of American foreign policy and national security. There are those business leaders who equally have pledged support for green investments and have opined and justified that, these investments are good for economic growth. IMF as an institutional leader has backed the assertion that the world economic debt-financed investment plan for green infrastructure with carbon pricing could lead to a net gain in employment.
More importantly, research has also indicated that sustainable leadership demonstrate a set of different critical leadership attributes that is driven by sustainable mindset. This mindset is based on the purpose driven belief that business is not a commercial activity divorced from the wider societal and environmental context in which it operates. They know that to be successful in the long term, leaders must innovate and manage across commercial, societal and environmental outcomes. Leaders with sustainability mindset align aspects of running their organization with these core values and beliefs as follows:
Multi System Thinking
The base for multi-system thinking ensures that, Sustainable leaders go beyond a deep understanding of their own organizational system and incorporate the interplay with the larger business, societal and environmental systems. Also they must critically assess the complexity that drive targeted decisions and actions that turn sustainability into a competitive advantage.
Stakeholder Inclusion
Another area of concern is that, Sustainable leaders must ensure they do not only manage stakeholders but they must include them in the day to day running of the business. They must actively seek to understand a wide range of points of view in order to drive decision-making with all those stakeholders.
Disruptive Innovation
Sustainable leaders ought to possess the courage to challenge traditional approaches. They must ask why it cannot be done. They must be able to cut through bureaucracy to drive the breakthrough innovation that is needed to find novel solutions that do away with a trade-off between profitability and sustainability.
Long-Term Activation
Sustainable leaders do not simply have an orientation towards the long term, they set audacious goals and drive concerted action and investments in pursuit of the set agenda. To do this requires a great deal of courage to stay the course in the face of setbacks and to make decisions that may be unpopular with some short-term oriented stakeholders.
As sustainability efforts gain momentum in society and as expectations grow, it is believed that, that organizations will play a central role in making the world a better place. Having said that, it is essential that board leaders and other stakeholders know how to enable and drive sustainability within the company. By engaging thoughtfully around board leadership, board culture, purpose, strategy and risk alignment, structure and process, people and composition, board leaders can ensure that their company does well by doing good.
Key lessons for Our Ghanaian Companies:
A lot of our Ghanaian companies are already being guided by and are pursuing robust CSR policies and implementation which is good. Fidelity Bank’s “Building lives through Finance”, Vodafon Ghana Foundation initiative for promoting health, the CBG “We stand with you” health campaign are but a few that must receive commendation. The stakes get high when the fundamentals are enhanced to embrace a new business compliance yardstick and benchmarks, ESG.
All these interventions and initiatives by these companies and more are endeared to ensure the well-being and safety of employees, citizens through fostering a positive work environment, better livelihood based on respect for human rights, valuing diversity and zero tolerance for workplace discrimination, violence or harassment and good health sounding great and impactful.
Therefore, to ensure the sustainability and enhancement of these great initiatives call for effective leadership support and control to understand and appreciate first the continuous need for these interventions so to aid the promotion of the following:
Upholding governance practices
In context, our Ghanaian companies must operate to the highest ethical standards by conducting business activities in accordance with code of business conduct and ethics. This must ensure the maintenance of strong stakeholder relationships through transparency and active engagement.
Mitigate the impact of operations on the environment
Secondly, it is advisable for business leaders to strive to minimize the environmental impact of operations and improve the efficient use of resources over time through concerted efforts, guided by policy frameworks that significantly have positive impact on the environment, its employees and stakeholders.
Be good corporate Citizens
Acting good citizens would ensure the interest, safety and well-being of the communities in which the company operates are integrated into the business decisions. By all means businesses are encouraged to support and remain philanthropic and invest more in volunteerism efforts but the society would benefits greatly if these initiatives are stretched further to engage other areas it has failed to consider.
In summary, we conclude by postulating that, as sustainability efforts gain greater momentum in society and as expectations grow, corporations would always play a central role in making the world a better place and that, it is essential that board leaders know how to enable and drive sustainability within the company. This thoughtful claim around board or sustainable leadership, board culture, purpose, strategy, risk alignment, structure and process, people and composition, could ensure that companies do well by doing good.
Discovery….Thinking solutions, shaping visions.
ABOUT THE AUTHOR
The writer is the CEO and Strategic Partner of AQUABEV Investment and Discovery Consulting Group. He is an Executive Director and the Lead Coach in Leadership Development and best Business Management practices for Discovery Leadership Masterclass. Dr. Genevieve Pearl Duncan Obuobi (Banker/SME Consultant and Leadership Strategist)
Email: [email protected] or [email protected]
