Directors’ Sustainability Roles and Responsibilities

A Global Compact publication recommended that the roles of the entire board and individual directors with respect to sustainability be integrated into various policies and statements of the duties and responsibility of the board and directors as follows:

  • In statements referring to the requirement to adhere to ethics, prudence and statutory obligations, include requirement to act in accordance with the company’s sustainability and social responsibility standards, values or policies
  • Within the fiduciary duty to act honestly, prudently and in good faith, add reference to acting in a socially responsible manner
  • Require that directors understand their sustainability roles in addition to their statutory and fiduciary roles
  • Add compliance with the company’s sustainability policy alongside references to complying with articles and bylaws, e.g. include a duty to ensure compliance with the company’s sustainability policies
  • Within references to following sound governance practices, add following socially responsible governance practices
  • Specify that the chairperson of the board, the board as a whole and each of the individual directors are responsible for setting the “tone at the top” in adhering to the company’s sustainability policies, values and commitments
  • Within monitoring duties, add monitoring sustainability performance, impacts and policy compliance (in addition to monitoring financial and operational performance)
  • Within descriptions of the board’s strategic planning duties, specify sustainability as a component of strategic planning and make reference to the need to take stakeholder considerations into account in strategic planning; reference the board’s responsibility to provide oversight and advice on how the company reduces negative and enhances positive social and environmental performance and impacts which take into account stakeholder considerations
  • Include responsibility for ensuring the corporate strategy includes long-term and annual sustainability goals, targets and metrics
  • Include responsibility to consider sustainability risks, opportunities and other implications that could affect the future performance of the firm when setting strategy, undertaking mergers, acquisitions, divestitures, joint ventures, major capital projects and approving major decisions
  • Within requirements to ensure financial results are reported fairly and in accordance with generally accepted accounting principles, include reference to ensuring sustainability results are reported fairly and in accordance with generally accepted sustainability reporting principles
  • Include requirement that directors become generally knowledgeable of the company’s stakeholder interests, sustainability impacts, risks, opportunities, dependencies and performance and the sustainability trends impacting its industry and the company’s employees, customers, suppliers, business partners and operating context
  • Include requirement to review and approve the sustainability report content and format and ensure all material aspects are covered; specify that the board is responsible for ensuring the integrity of non-financial reporting
  • Include duties to ensure the safe and sustainable operation of the company and to foster a corporate culture that promotes ethical, socially responsible and sustainable practices and decisions
  • Include a board role to ensure subsidiaries adopt sustainability strategies and are in compliance with the company’s sustainability policy; specify that the board monitors sustainability performance of subsidiaries
  • Reference that the lead sustainability executive has a direct reporting relationship to the board
  • Specify that the board is responsible to ensure the organization has identified its key stakeholders, to consider the legitimate interests held by stakeholders and to monitor the overall quality of stakeholder relations
  • Consider appointing a stakeholder advisory panel or expert sustainability advisory panel to the board to keep the board abreast of emerging stakeholder and sustainability trends and expectations

For further information, see The Essential Role of the Corporate Secretary to Enhance Board Sustainability Oversight: A Best Practices Guide (United Nations Global Compact, September 2016).

This article is adapted from material in Sustainability and Corporate Governance: A Handbook for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

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