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Governance: Board Charters for Sustainability

A board committee should have clear accountability for sustainability strategy and performance, whether by a standalone committee or by expanding the responsibilities of an existing committee. Ceres provides best practices and works with companies to implement new standards for governance.
Governance: Board Charters for Sustainability

A board committee should have clear accountability for sustainability strategy and performance.

A board committee should have clear accountability for sustainability strategy and performance, whether by a standalone committee or by expanding the responsibilities of an existing committee. The committee charter should explicitly identify the committee’s oversight duties. Below are some guidelines and best practices that Ceres companies and others are implementing.

Purpose

The charter should clearly specify the scope of the committee’s oversight of sustainability issues. Nike’s Corporate Responsibility Committee reviews significant policies and activities and makes recommendations to the board of directors regarding a broad range of operational and philanthropic sustainability practices and initiatives. The committee includes non-executive directors and its meetings are attended by Nike’s Executive Team. The committee’s charter gives it the power to review and make recommendations regarding some of the key “hot button” issues that the company faces, including human rights and environment issues.

Composition

The committee’s composition should include at least two non- executive directors. Ideally, these members should be chosen based on considerations that include expertise on sustainability issues of particular relevance to the business.

Duties and Responsibilities

Adele Simmons, MMC Board“As fiduciaries, it is incumbent that directors act in a way that considers the full spectrum of risks facing companies, including climate change, water scarcity, and human rights.”
—Adele Simmons, MMC Board

The charter should specifically reference the company’s priority sustainability issues. Nike’s Corporate Responsibility Committee charter specifically mentions environmental and labor auditing and compliance.

The charter should clearly make the linkage between sustainability and business priorities. Ford’s sustainability committee charter clearly states that the “principal functions” of the committee include assisting management in the formulation and implementation of policies, principles and practices to foster the sustainable growth of the company on a worldwide basis and to respond to evolving public sentiment and government regulation concerning vehicle emissions.

The committee must also aid management in setting strategy, establishing goals and integrating sustainability into daily business activities across the company, and keep under review new and innovative technologies that could help the company foster sustainable growth.

The charter should include performance protocol, sustainability reporting and goal setting. HSBC’s Corporate Sustainability Committee is tasked with the responsibility of reviewing and advising the Board on the Group’s sustainability reporting and sustainability targets. The Committee also has an examination and approval function relating to the Group’s environmental performance and impacts.

The charter should provide a framework for the integration of sustainability and risk management. Sysco Corporation’s Sustainability Committee is explicitly charged with reviewing management’s risk assessment and risk management policies and procedures with respect to sustainability impacts and considerations.