G1: Board Oversight for Sustainability
|CERES ROADMAP EXPECTATION|
|The board of directors will provide oversight and accountability for corporate sustainability strategy and performance. A committee of the board will assume specific responsibility for sustainability oversight within its charter.|
|Prudential’s Mary O'Malley, VP of Environment Sustainability, talks about the progress that Prudential is making on sustainable governance. Watch the video...
Check out Roadmap in Action for more examples of how companies are implementing the Ceres Roadmap.
The board of directors is responsible for providing insight and oversight on both risks and opportunities for the business, and sustainability issues should be considered part of this responsibility. To fully embed sustainability into the board oversight process, companies should recruit directors with diverse backgrounds, provide education and training to board members on key sustainability issues, and designate responsibility to a specific board committee.
HOW ARE COMPANIES PERFORMING?
In The Road to 2020: Corporate Progress on The Ceres Roadmap For Sustainability, we evaluated 600 of the largest U.S. companies on their progress towards meeting the expectations laid forth in the Ceres Roadmap for Sustainability. Using data compiled and analyzed by Sustainalytics, this expectation looks at the assignment of a corporate board member or a board committee with explicit responsibility for sustainability.
Of the 600 companies assessed in this report, 28 percent have instituted board oversight of sustainability issues, 39 percent have instituted management oversight and 23 percent have both.
Leading companies are recruiting a diverse roster of board members, drawing upon their unique perspectives shaped by personal attributes (such as gender, race, geography) and professional experience, notably including sustainability expertise. A diversity of backgrounds and experiences ensures that a wide-range of viewpoints can be offered regarding business risks and opportunities, which, for a company operating in the 21st century, includes environmental and social issues. For example, Prudential Financial recently added sustainability and corporate responsibility skills as one of its criteria for board member selection. Doing so not only illustrates the company’s commitment to sustainability at the highest levels, but also enables the board to provide meaningful oversight for emerging environmental and social issues that confront the business.
To formalize board oversight on sustainability issues, a designated board committee should be tasked with related oversight. Companies, including Consolidated Edison, Merck and Weyerhaeuser, incorporate specific language in board committee charters detailing the board’s role in providing input and guidance across the company’s environmental and social sustainability strategies, goals, policies and practices.
Board oversight can take several forms. Some companies establish stand-alone committees, such as McDonalds’ Corporate Responsibility Committee, while others assign functional responsibility to an existing committee, such as EMC’s Corporate Governance and Nominating Committee. The type of committee is less important than the scope and ambition of its mandate, which should include company-wide oversight on issues such as climate change, human rights, sustainable supply chain management, health and safety, as well as sustainable products and services. Leading companies, for example Nike, provide board members with regular training and education on key sustainability issues. This education promotes a more strategic, long-term approach to the board’s overall assessment of the company’s business performance.