Moving up: Sustainability gaining strategic ground
Decision-making related to sustainability strategy and performance is increasingly being handled at the top executive level. It is more embedded in strategies and core business functions than ever before. However, sustainability is still not systematically integrated into the DNA of most companies.
From being tackled on an ad hoc basis 15 years ago, our findings show that sustainability is increasingly approached in a more strategic manner, with more explicit and formalised commitment from chief executive and boards. Oversight of sustainability performance is moving up the corporate ladder. A few mature companies are leading the way, with the vast majority of others following suit.
Yet nearly 60 per cent of respondents to the Implementation Survey indicate that their board of directors does not address corporate responsibility as part of their regular agenda. There is a sense that boardrooms are lagging behind.
Whereas ‘tone at the top’ remains a key driver of performance, an emerging issue is how the ‘tone at the middle’ and lack of senior management involvement represents a barrier to organisational change.
INTEGRATION INTO STRATEGY AND CORE FUNCTIONS
An increasing understanding of the link between sustainability and business performance has led to a gradual integration of sustainability issues into core business strategies. This is particularly the case for environmental issues like climate and water management, which are high on the global agenda and represent areas in which companies increasingly face legal, operational and financial risks and opportunities.
As such issues grow in importance, companies are investing more resources to improve performance, and there as been widespread growth in sustainability departments. Mature organisations are working to embed responsibility for performance into relevant corporate functions such as procurement, marketing, R&D, and product development.
Interestingly, nearly 50 per cent of respondents to the Survey state that they integrate sustainability into relevant corporate functions, business unit strategies and operations, indicating that sustainability is increasingly treated as a strategic issue.
THE ROLE OF THE UN GLOBAL COMPACT:
ALL ABOUT COMMITMENT FROM THE TOP
As sustainability is increasingly being handled at the strategic level, what has been the Global Compact’s role in catalysing change?
A PERSONAL PROMISE
The Global Compact has pushed commitment and responsibility up the corporate ladder in a number of ways. Perhaps the most important is the requirement that the CEO personally signs a Letter of Commitment addressed to the Secretary-General of the United Nations to join the initiative. Every year, CEOs are required to reconfirm their commitment in the company’s Communication on Progress, ensuring that the focus from top management is maintained. Caring for Climate, the CEO Water Mandate and the Women’s Empowerment Principles all follow the same model, and require additional commitments from the CEO.
Moreover, through organising events and conferences exclusively for CEOs and Board Members, such as the Global Compact Leaders Summit and UN Private Sector Forum, the Global Compact helps keep issues at the top of executives’ minds.
MAKING IT CORE
In recent years, the Global Compact has stepped up its focus on the importance of integrating sustainability issues into core corporate functions, and has started organising events which target specific functions such as general counsels and compliance officers. In December 2014, as many as 300 compliance officers attended an event marking the tenth anniversary for the anti-corruption principle.
Another example is LEAD, the Global Compact leadership initiative, which has a specific focus on what sustainability leadership means for core corporate functions. The model is to identify good practice among leading companies, and then spread this to other Global Compact participants – ensuring that leading companies can inspire improved performance throughout the rest of the business community.
SHAPING VISION AND STRATEGY
Notably, almost half of surveyed participants state that the Global Compact has
played an important role in shaping their company’s vision (an equal number of
small and large companies).