Rethinking governance for a changing world

Governance, and how to improve it, is a vital issue that affects every citizen because it gets to the heart of how we organize ourselves as communities, companies and as a society to achieve our most basic objectives. The issue of governance, the process by which decisions are made and implemented, is as old as civilization itself.

As corporate sustainability has transitioned from a focus on compliance, risk management and cost reduction to a strategy aimed at growth and brand differentiation through product and service innovations and optimization of resource consumption and efficiencies, there is a corresponding need for a transition in governance. Ironically, there is only a modest focus on governance at a time when current approaches increasingly are outdated.

Governance is practiced today in one of three principal ways: through top-down hierarchies (command and control) characteristic of governmental bodies and many corporations; through networks such as markets where buyers and sellers agree on price levels and other conditions for transactions of specific products and services; and through collaborative partnerships where individuals, groups or institutions find common cause to achieve specific goals that none can separately attain. Within specific organizations, such as government agencies or corporations that must reconcile many kinds of economic and social objectives, all three types of governance can operate simultaneously. These objectives can range from complying with corporate financial disclosure requirements, improving air quality, participating in local land use decisions, or managing the diverse participants in a global supply chain.

Much of the current focus on governance deals with the management of individual issues or processes within large established institutions. This approach to governance is being fundamentally disrupted and transformed. Three major factors explain this disruption: 1) the growing scale and complexity of governance challenges where impacts can be global, regional and local simultaneously (think turbulence in the financial markets); 2) the emergence of system-level challenges that defy the jurisdictions or capabilities of institutions (consider the interrelationships involving climate change, the exacerbation of drought or flood conditions and the availability of water supplies for drinking or food production); and 3) the near-instantaneous availability of information to citizens (see the immediate reaction of customers who do not wish to pay higher access fees for banking services).

All three factors are now in play in the evaluation of how to make the New York metropolitan region, and other major population centers around the world, more resilient to future storm surges or sea level rise. Should residents of flood damaged or destroyed properties rebuild on the same sites that may again be vulnerable, and receive flood insurance backed by taxpayers? Should a sea wall be constructed to protect against future storm surges or should wetlands be enhanced to create natural barriers to rising water levels? Should power generation and distribution systems be relocated and building codes modified? How can local, state and federal officials, as well as the private sector, non-governmental organizations and individual citizens, have a voice in answering these and other questions?

Next page: Working top-down and bottom-up