Why smart governance is the secret to sustainability success
<p>Companies including Lockheed Martin are proving the power of an effective governing structure to drive progress.</p>
Far too often, corporate responsibility and sustainability programs are disconnected from the core strategy and operations of an organization. Sustainability practitioners are designated with a tall order to transform the organization to minimize its negative environmental and social impacts while maximizing the value of sustainability for its stakeholders. Frequently, they have a mandate without power to execute the vision set forth.
Perhaps they find themselves isolated in an EHS (compliance) department or a similar non-revenue generating function with no access to the C-suite. Practitioners armed with a broad set of soft personal skills, and cunning enough to navigate the hierarchy of an organization, often can find limited success. Some gain success as they learn more about the organization and find allies and champions throughout. That said, the success achieved is tied to the individual practitioner's perseverance and relationships, not because the organization has created a sustained program that is institutionalized by a formal governance structure.
Embracing good governance
Successful sustainability and corporate responsibility programs not only do great things for their organizations, they also are governed and engaged in a way that connects with the organization vertically and horizontally. In order to achieve this, establishing a governance structure to guide and manage sustainability and corporate responsibility is essential. By doing so, the group responsible for driving sustainable practices has access to senior leadership and reach across core functions of the organization. This allows the program to set direction, establish goals and create policies to execute the strategy. A sound structure requires multi-level, cross functional leadership committees at the board, executive leadership and management levels of the organization.
Reinforcing this notion of strong governance is the Global Reporting Initiative's (GRI) new G4 guidelines. Comprehensive reporting, according to GRI, requires organizations to answer whether there is an executive responsible for sustainability, what the process is for conveying concerns to the Board of Directors and, conversely, how the Board of Directors delegates authority to the organization's executives. Further, G4 reinforces the importance of board involvement by asking for organizations to report on the following:
• What measures have been taken to educate the board on sustainability topics?
• What role has the board taken in the development, approval and updating of the organization's purpose, mission, values, strategies, policies and goals related to ESG impacts?
• How is the board involved in assessing management effectiveness and review of reporting to ensure material Aspects (e.g. impacts/topics) are covered?
Lockheed Martin leads the way
These reporting requirements reinforce the critical importance of good governance. An example of a well-structured corporate responsibility governance model can be found at Lockheed Martin. This organizational structure has board oversight with the Ethics and Corporate Sustainability Committee, strategy and policy development with the Corporate Sustainability Council, and strategy execution and management with the Sustainability Working Group. "Our governance structure for sustainability allows for balanced leadership oversight and guidance along with broad-based support from each of our five business segments for implementing strategy and building awareness," said Leo Mackay, Lockheed Martin's vice president of ethics and sustainability.
Governance structure also reinforces the need to communicate sustainability efforts regularly and sufficiently throughout the organization. By doing so, sustainability truly can become an embedded principle. With effective governance, sustainability activities have the teeth needed to support a vision through policies and oversight that will drive progress within the organization.
Organizations that want to embrace sustainability practices should strive to have governance structures that adequately support the overarching vision of implementing sustainability within organizations. As sustainability practitioners, we are often interested in demonstrating progress, sometimes at the risk of not pausing to build the foundation required for sustainable success. Incremental progress does not require strong governance, but sustained excellence in sustainability or otherwise does require strong governance.
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