Organizational Governance Organizational Governance

Introducing the Modern, ESG-Fluent Boardroom

Brand Provided | By Coro Strandberg | Published 2 years ago | About a 4 minute read

The status quo is being upended. The foundations of our economy and society are being challenged; and society is calling into question the purpose of the economy and the purpose of the organization. We are in the throes of a paradigm shift in business and organizations as society grapples with how nine billion people can live well in harmony with nature and each other over the next decade. Boards are in the epicentre of these changes. Leading boards reimagine their operations to serve not only their organizations but also to serve society — they are the architects of the modern boardroom.

Until recently, boards have singularly focused on shareholder returns as the arbiter of success. ESG (environment, social and governance) has been out of sight, out of mind, off-limits and therefore out of accountability and decision-making (with thanks to Dr. Victoria Hurth for this framing). But all that is changing, and fast.

The recent report, Becoming Fluent in ESG Governance: Putting Inclusion, Purpose, and Climate Governance into Action — which summarizes a national conference hosted by Governance Professionals of Canada (GPC) — unpacks many of these changes and is a must-read for boards and executives and those who advise them. It is the modern governance playbook. Being fluent in ESG is no longer something that just brings added value to a company; rather, it is an imperative to thrive in the business world.

Here are my takeaways on ESG governance fluency, drawn from this modern governance playbook and from being moderator of the national GPC conference.

Pursuing long-term purpose

Modern boards adopt a long-term view. They keep short-term results in focus but do so within the context of their long-term objectives. These long-term objectives are increasingly expressed in a purpose that sets out the organization’s North Star, the company’s compelling reason to exist that contributes to the long-term well-being of people and planet. The new ISO 37000 Governance Guidance reinforces this approach. This emerging purpose governance blueprint I designed sets out practical steps boards can take to embed purpose within their governance. It is expected that in the future investors will be using their investments to empower social change of purpose-driven companies, where their investments are an expression of their own purpose.

Learning from indigenous governance

Canadian Indigenous businesses operate much like social enterprises, with joint commercial and social objectives. They focus on shared prosperity with a dual mandate to make profits and to benefit their communities. Their shareholders are their community members. Learning from Indigenous governance, modern boards:

Have more collaborative and less hierarchical styles and cultures
Adopt multi-generational, long-term and stewardship thinking
Adopt a social purpose as the reason their organization exists

Fostering truly inclusive governance

Diversity is tied to good and effective governance. For leading boards, it is rooted in a moral and ethical responsibility to tackle systemic discrimination and in a desire for effective governance. Modern boards broaden the lens of candidate evaluation and appraise candidates on the experience they bring to the table — including background gained from community involvement, volunteering and lived experience. Allyship is a necessary practice to ensure equity-deserving groups have a seat at the board table. Directors who benefit from privilege have a moral responsibility to lift other directors up. To become an inclusive and anti-racist board, leading boards examine their culture. Governance culture is often invisible, particularly for directors who are privileged and benefit from it.

Acting on the climate emergency

With extreme weather disrupting operations, communities and supply chains; and in a world that includes growing climate-related disclosure requirements, companies and boards are under pressure to rewire their organizations to act on the climate emergency. Modern boards declare a climate emergency. With society and the economy transitioning to net-zero emissions, organizations need to adapt to this new reality. Leading boards become climate-competent and ensure adoption of measurable climate goals linked to the strategy. They prompt management to take a collective industry view in addressing climate risks and opportunities, even leading industry climate collaborations where necessary.

Embracing governance innovation

The fiduciary duty of boards and directors is being redefined in the 21st century. The boardroom and its advisors need to unlearn old mindsets, overcome their biases, and embrace he new governance practices. Society is calling upon boards to serve the greater good. This requires governance innovation and leadership from modern boards and others to prepare for and influence the future.