[Editor's note: This article originally appeared in the BSR Insight and is reprinted with permission. It is the first installment of a two-part series examining the role of corporate social responsibility in the boardroom.]

Sustainability today is seen by many company leaders as an important strategy in business success, and that idea has made it into more and more boardrooms in the last several years. In light of that trend, BSR recently completed a paper for the U.N. Global Compact examining the role of the board in corporate social responsibility (CSR). Based on that work, as well as BSR's experience working with member companies, this article examines board roles and responsibilities, the three approaches to incorporating sustainability into the board structure, and how the composition of the board influences the company's approach to sustainability.

Board Roles and Responsibilities

A board's responsibility for sustainability can be categorized in three ways: traditional duties adapted for a world in which sustainability is evermore important, explicit responsibilities for activities related to sustainability performance, and implicit responsibilities related to prioritization and agenda‐setting.

Traditional activities adapted for a new world: Boards generally focus on core activities -- overseeing business strategy, selecting and overseeing the chief executive and determining executive compensation, and ensuring legal compliance.

Given this, the integration of sustainability and governance is, in part, about the application of traditional governance activities to a 21st century operating environment. Over the past two decades, company leaders have learned that topics not previously considered relevant to business, such as human rights and climate change, can shape business success. Many have seen the hard‐won reputations of their businesses damaged by campaigns led by an increasingly vigorous civil society that is now fueled by social media. And many leaders have found it difficult to maximize the value of core assets when social and environmental questions can affect the legal license to operate. Moreover, the primacy of shareholder value, especially in the context of publicly traded companies, is subject to increasing debate.

In this context, directors' traditional responsibilities are being redefined to include ESG considerations. This is seen through the rewriting of charters for boards and board committees to include these topics.

Specific sustainability‐related activities: Boards are also undertaking several specific activities related to sustainability, including the integration of strategy and sustainability, a focus on stakeholder perspectives, the approval of sustainability reports, and the oversight of executive accountability and compensation for sustainability performance. In contrast to what is described in the previous section, these activities generally go beyond legal requirements.

As boards undertake these activities, new questions arise, and new sources of information grow in importance. The already complex subject of executive compensation has become more challenging for company leaders aiming to integrate sustainability factors into decisions about rewarding senior management.

Approval of sustainability reports also illustrates changing dynamics. Many boards now sign off on their companies' sustainability reports before publication. These reports do not raise the same kinds of legal attestation requirements associated with financial reports -- yet. The Johannesburg Stock Exchange, for example, now requires listed companies to report on sustainability considerations, and China's state‐owned Assets Supervision and Administration Commission now expects the largest state-owned companies to report as well. These developments coincide with a rising interest in "integrated reporting." As this movement gains steam, it's possible boards will devote more attention to how their companies report on energy use, water use, labor issues, and other topics directly related to Global Compact principles.

Implicit responsibilities: Directors also undertake informal activities that have a high degree of relevance to sustainability performance, such as setting agendas, raising questions, and shaping mindsets.

It is possible to reduce effective governance to the concept of stewardship, and good stewards of corporate assets ensure that management considers all relevant risks and opportunities. Doing so effectively means that the board takes a close look at topics such as societal and regulatory acceptance of new technologies and business processes, entry into new markets, and the impact of "externalities" on business success. Over the past two decades, we have seen multiple examples of the risks incurred when boards overlook such questions. In many cases, the ability of company leaders to bring their companies' innovations to market can rise and fall based on how well they anticipate whether society is prepared to accept those innovations.

Board Structure

According to 2010 research by the UN Global Compact, 39 percent of 1,300 surveyed companies have boards that "routinely address corporate sustainability issues." But the mechanism used by companies varies widely, with three models appearing most frequently: full board oversight, dedicated sustainability committees, and existing committees taking responsibility for sustainability.