Many of us wonder: "Is this company just putting on a show of being interested in the environment or social or human rights issues? Or does this company really understand that these matters affect people's lives and the future of our planet, as well as their own profitability?" By the end of the process of researching and writing "A Better World, Inc.: How Companies Profit by Solving Global Problems... Where Governments Cannot" (Palgrave Macmillan, 2014), I found that there are three core questions to determine when a company is serious about sustainability.
Core Question #1: Is the Board Organized to Address Sustainability?
The board of directors has the legal and fiduciary responsibility to ensure the company's prosperity. Risks in the 21st century include scarcity or resources, high costs of fossil fuels, labor conflicts, community resistance resulting from human rights abuses, and the lack of a qualified workforce for high technology jobs. Additionally, growth opportunities abound for companies that pursue innovative solutions to global challenges. These are boardroom issues.
In order to maximize shareholder value, the board must be organized to address the company's sustainability agenda.How can you discern that the board is organized for this purpose?
- Does the board of directors have a committee focused on sustainability matters, with the members of the committee having relevant stature, experience, and expertise? This information should be available on the company's website. (One exception is Ericsson, where the entire board focuses on sustainability. See the company's core strategy on their website.)
- Is the board of directors comprised of people from diverse backgrounds and perspectives, including people with experience and expertise from emerging markets; social, economic, and environmental matters; and new technologies? (This indicates that the board as a whole is able to imagine the company's greater potential, thereby asking relevant questions of management in a global marketplace where changing social, economic, and environmental factors affect growth and profits.)
Core Question #2: How well does the company engage with valuable NGO/nonprofit partners on sustainability matters?
Companies will maximize the success of their sustainability efforts by collaborating with NGOs. Companies bring valuable resources to bear in achieving social, environmental, and economic impacts. They have much to gain, however, by accessing and leveraging the expertise, community relationships, and credibility of particular NGO partners for specific initiatives/programs within a company's overall sustainability strategy.How can you discern that the company engages with valuable NGO/nonprofit partners in meaningful relationships?
- What is the quality and credibility of the NGO/nonprofit partners? What can you learn about the organization's mission and work, board members and their affiliations, CEO background, and their key sources of revenue? This information should be available on the company's website as well as the NGO/nonprofit partner website and the NGO/nonprofit IRS Form 990.
- How meaningful is the relationship between the company and the NGO/nonprofit, and what is the impact of their joint efforts? What can you determine based on the company's and NGO/nonprofit's communications, as well as a search of the Internet?
Core Question #3: How well does the company engage with stakeholders?
The hallmark of an effective sustainability program is its engagement with a variety of stakeholders in meaningful discussions about company decisions that will have social, environmental, and economic impacts. Stakeholders include, among others, consumers, employees, investors, and communities where the company operates. Examples might include the location or relocation of a major facility in an emerging market, the sourcing of natural resources from a particular geographic location, pricing a product that will affect a segment of the community that is price-sensitive, or creating a new product or service that is designed to address a social or environmental challenge.
Companies can maximize their value by capturing the wisdom of stakeholders from the far corners of the world.How can you discern that a company is engaging with stakeholders? Since there are a variety of stakeholder groups, and so many forms of engagement, this can be more difficult to ascertain, but here are a few ways.
- Does the company have a Stakeholder Advisory Council, comprised of qualified members from diverse perspectives and backgrounds? Does the group have a meaningful role, meet frequently and long enough, and have a relationship with senior enough executive management -- perhaps even occasional meetings with the CEO? This information should be available on the company's website.
- Does the company describe its relationships with NGOs/nonprofits that help facilitate their engagement with stakeholders in global or remote communities where the company has a presence? Do these NGOs/nonprofits seem well qualified based on their mission and work, board members and their affiliations, CEO background, and their key sources of revenue? This information should be available on the company's website as well as the NGO/nonprofit partner websites and the NGO/nonprofit IRS Form 990.
- Does the company have a social media presence that allows for give and take?
- Does the company participate in organizations such as CDP, the Global Reporting Initiative, The IIRC, and the Sustainability Accounting Standards Board (for US companies) that help facilitate accountability and disclosure for social and environmental impacts?
Consumers, employees, and investors are driving the sustainability agenda, and smart companies are paying attention. These questions should help you determine which are the smart companies.