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Sustainability & Long Term Thinking in the Board Room: Webinar Recap

On Thursday February 26th, 2015 the Conference Board of Canada hosted a webinar in collaboration with Global Compact Network Canada (GCNC) on Corporate Sustainability and Long-term Thinking in the Board Room. board room

An esteemed panel shared their insights, shedding light on the evolving roles and responsibilities of Boards of Directors regarding sustainability and developing a sustainable business strategy:

  • Should Boards be discussing and overseeing how sustainability is managed?
  • How are stakeholders, including shareholders, engaged in sustainable initiatives?
  • What is the value and purpose of non-traditional reporting (the sustainability report, corporate responsibility report, or integrated report)?

The panel included the Global Chairman of Unilever, Michael Treschow; the Chair of CSR Committee at PVH Corp. Rita M. Rodriguez; and the Managing Director and Global COO of BlackRock’s Corporate Governance & Responsible Investment Team, Chad Spitler.  Helle Bank Jorgensen, a Facilitator for the Global Compact Board Programme and the Head of GCNC moderated the session. board room

The Global Compact Board Programme board room

“We have all seen good business practices and less good business practices, and there are many executives who want to ensure that not only the potential blind-spots, but also the bright spots get the attention they need from the Board. In growing numbers Boards are listening and wondering what action to take? How? And, to whose benefit?” said Helle, while kicking off the discussion.

Helle also presented an overview of the new Global Compact Board Programme at the outset of the webinar. This is the first programme of its kind to support Boards of Directors to effectively oversee and help drive their company’s sustainability strategy. The program aims to empower Boards to ensure the long-term success of a company and the society in which they operate. “We are seeing changing expectations of companies and Boards.  So, while the “cost of failure” for entrepreneurs has never been lower, the “cost of failure” for Board members has never been higher. With growing expectations and scrutiny from the public, the potential for reputational risks and liabilities for the companies and the Board is increasing” remarked Helle.

Characteristics of a Sustainably-Focused Board board room

Michael Treschow, Global Chairman of Unilever discussed what he believes makes an ideal Board and how the board should work with management in order to ensure that sustainability and long-term risks and opportunities are prioritized.  Michael highlighted Board diversity, for example, as a necessity: there is “need for a more diverse Board that understands the questions and issues around a company – a diversity of minds”.  Michael also commented that Board Members need to fundamentally believe in the value of a sustainable business model: “Boards need to buy into the business model.  In Unilever’s case this is the Sustainable Living Plan. The board must believe this can drive profitable growth in the short and long-term.”

He added that a sustainable strategy can also be a logical and profitable strategy:Unilever is a consumer goods company, if we do a good job serving our present and future consumers, with motivated employees and satisfied suppliers we will have a good return for our shareholders.”

Challenges in Balancing Long-term Success and Short-term Returns

Rita Rodriguez, the Chair of the CSR Committee from PVH Corp. highlighted key difficulties companies face when trying to balance long-term success with short-term returns: “there is clearly a tension between the short-term and the long-term. Some of the benefits that are accrued when looking at long-term factors, such as the environment where the consumer operates and the communities where they live have a longer term return than the next quarter or the next year” Rita explained. “One should not forget that there is a community of investors that prioritize the short-term return, and there is a community of consumers, who buy thinking about what they need right now, at the lowest possible price, and not necessarily what is in the long-term benefit of the community at large or the common good.”  board room

Rita pointed out that executive compensation is an important tool that can be used to embed sustainability throughout the business, reward long-term decision making, and ultimately balance the tension between short-term and long-term success: “sustainability issues need to be reflected in performance evaluations and compensation.  There is a bottom line to executive motivation”.

Engaging Investors in Sustainability board room

Chad Spitler, Managing Director of BlackRock discussed the role of the Board from an investor’s point of view and overall, how investors must clearly see the link between sustainability and the business strategy: “Investors want to see how sustainability relates to business risk and opportunity – the link between the business case and sustainability.” Chad remarked that part of demonstrating this link means taking advantages of opportunities like the Global Compact Board Programme to launch the journey of the Board toward embedding sustainability into the business.

Chad suggested that there is a shifting understanding among management teams and investors regarding the perceived opposition between taking care of shareholders and taking care of stakeholders.  At the end of the day, investors like BlackRock are assessing whether companies are taking short-term risks that will sacrifice the long-term viability of the company.

Chad also shared some of the big questions he considers when assessing the long-term sustainability of a company: “How does the company define sustainability for themselves?  What is material? What factors affect the company? What oversight is there? Is the Board trained and able to communicate with investors on these topics?” board room

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Overall, the panel had a great discussion on the issues surrounding Board-level buy in on a sustainable business strategy. The combination of different viewpoints, collaborative experience and genuine candour led to an enlightening presentation for everyone involved.

The Global Compact Network Canada is offering Canadian participants access to even more knowledge and insight on the Board Program later this year with 3 webinars and a North-American launch of the Board Program currently in the planning phase. If you are interested in learning more about the Board Programme and require additional information please contact Helle Bank Jorgensen, Jorgensen@globalcompact.ca or gcboardprogramme@unglobalcompact.org.