The Key Function of a Corporate Board
A key function of a company’s Board of Directors is to assess the future direction and set the long-term strategy of an organization. Any leadership structure should include positive, goal-oriented, and progressive voices to reach the critical business objectives of maintaining healthy profits and ensuring the longevity of a business entity. These goals are best supported by the adoption of strategic corporate innovations that are sustainable in nature and optimize financial performance in an ever more uncertain and chaotic market environment.
Why Inclusion of External Stakeholders is Critical
Members of a corporate Board should ideally be external stakeholders: independent non-executive directors. This brings objectivity and non-emotional decision making to the Board. Board Directors should also be representative knowledge experts in their chosen fields and be able to apply system thinking to the complex global marketplace in which businesses operate today.
Creating Value for Your Business…and Society
One of the most important objectives of any for-profit company is to make money and maintain a certain rate of cash flow to fund its ongoing business and to build financial reserves for future investment and growth. What was true 40 years ago remains true with increasing urgency, “the underlying general objective of any corporation must be to create value for both society and the corporation.” That sentiment has often been viewed as quaint over the last four decades but it is increasingly relevant in today’s world of climate change impacts that disrupt business operations and render local and regional economies in-operable for days and weeks at a time.
Thinking Strategically about Corporate Sustainability is a Must, Not a Nice-to-Have
It is no longer good enough, sufficiently strategic or financially attractive to run a business with one primary goal in mind: increasing stockholder wealth. It is critical that a company’s diverse set of stakeholder (both inside and outside of a company) objectives be identified, prioritized, and strategically developed.
Harvard Business Review makes it clear a company must develop its own strategic philosophy, usually in coordination with an organization’s Board, CEO, and key stakeholders. “Strategy formulation is tough, demanding, and often unpopular work.” And let’s be clear: that business strategy must embed a sustainability mindset. Developing a corporate sustainability business case that weighs the pros and cons of pursuing three parallel objectives – profitability, social equity, and mitigation of environmental impact – is challenging and complicated. Yet, the urgent need for a sustainability strategy is clear; the payoff, tangible. The formulation of a sustainable strategy provides manifold benefits to all sizes of organizations including greater access to capital, higher level of risk mitigation, and increased brand performance.
Developing High-Level Sustainable Business Strategies
“If a company lacks a strategy expressed in part in philosophical terms, its projection of the business’s future is not a strategic plan…only a financial forecast…” The quintessential role of the Board is to “fund strategies – not projects.” If your company isn’t creating strategies that address long-term challenges, it won’t survive the inevitable uncertainties it faces in a globalized, climate change-impacted marketplace.
Two Key Takeaways for C-Suite Executives
There are two main takeaways on which to digest and then act. First, if your Board is not discussing how sustainability measures can be embedded into your organization’s products, business processes, codes of conduct, financial decision-making, and strategic leadership, they lack the necessary vision to guide a company. Installing a non-executive director who is a sustainability knowledge expert on a corporate Board is a smart and advantageous next step. Vision drives strategy. Second, if your company has approached sustainability piece-meal with ad hoc projects and assigned oversight to entry-level managers, your corporate sustainability efforts to date, are woefully inadequate and wholly incomplete. Development of a comprehensive business case that embeds corporate sustainability into a company’s long-term business goals ensures the required mix of executive buy-in, appropriately allocated resources and funds, and measureable targets to be defined. A good strategy determines a successful plan.
TripleWin Advisory develops sustainable business plans to be embedded into the long-term strategic decision-making of a company. In so doing, it provides businesses with continued profitability, relevancy, and longevity in the market. Learn more.