Introducing the Modern, ESG-Fluent Boardroom

The status quo is being upended. The foundations of our economy and society are
being challenged; and society is calling into question the purpose of the
economy
and the purpose of the organization. We are in the throes of a paradigm shift in
business and organizations as society grapples with how nine billion people can
live well in harmony with nature and each other over the next decade. Boards are
in the epicentre of these
changes.
Leading boards reimagine their operations to serve not only their organizations
but also to serve society — they are the architects of the modern boardroom.

Until recently, boards have singularly focused on shareholder returns as the
arbiter of success. ESG (environment, social and governance) has been out of
sight, out of mind, off-limits and therefore out of accountability and
decision-making (with thanks to Dr. Victoria
Hurth for this
framing). But all that is changing, and fast.

The recent report, Becoming Fluent in ESG Governance: Putting Inclusion, Purpose, and Climate Governance into Action
— which summarizes a national conference hosted by Governance Professionals of
Canada (GPC) — unpacks many of these changes and is a must-read for boards
and executives and those who advise them. It is the modern governance
playbook.
Being fluent in ESG is no longer something that just brings added value to a
company; rather, it is an imperative to thrive in the business world.

Here are my takeaways on ESG governance fluency, drawn from this modern
governance playbook and from being moderator of the national GPC conference.

Pursuing long-term purpose

Modern boards adopt a long-term view. They keep short-term results in focus but
do so within the context of their long-term objectives. These long-term
objectives are increasingly expressed in a purpose that sets out the
organization’s North
Star,
the company’s compelling reason to exist that contributes to the long-term
well-being of people and planet. The new ISO 37000 Governance
Guidance reinforces this approach.
This emerging purpose governance
blueprint
I designed sets out practical steps boards can take to embed purpose within
their governance. It is expected that in the future investors will be using
their investments to empower social change of purpose-driven companies, where
their investments are an expression of their own purpose.

Learning from indigenous governance

Canadian Indigenous businesses operate much like social enterprises, with
joint commercial and social objectives. They focus on shared prosperity with a
dual mandate to make profits and to benefit their communities. Their
shareholders are their community members. Learning from Indigenous governance,
modern boards:

• Have more collaborative and less hierarchical styles and cultures

• Adopt multi-generational, long-term and stewardship thinking

• Adopt a social
  purpose
  as the reason their organization exists

Fostering truly inclusive governance

Diversity is tied to good and effective governance. For leading boards, it is
rooted in a moral and ethical responsibility to tackle systemic discrimination
and in a desire for effective governance. Modern boards broaden the lens of
candidate evaluation and appraise candidates on the experience they bring to
the table — including background gained from community involvement, volunteering
and lived experience. Allyship is a necessary practice to ensure
equity-deserving groups have a seat at the board table. Directors who benefit
from privilege have a moral responsibility to lift other directors up. To become
an inclusive and anti-racist board, leading boards examine their culture.
Governance culture is often invisible, particularly for directors who are
privileged and benefit from it.

Acting on the climate emergency

With extreme weather disrupting operations, communities and supply chains; and
in a world that includes growing climate-related disclosure
requirements,
companies and boards are under pressure to rewire their organizations to act on
the climate emergency. Modern boards declare a climate emergency. With society
and the economy transitioning to net-zero
emissions,
organizations need to adapt to this new reality. Leading boards become
climate-competent and ensure adoption of measurable climate
goals
linked to the strategy. They prompt management to take a collective industry
view in addressing climate risks and opportunities, even leading industry
climate collaborations where necessary.

Embracing governance innovation

The fiduciary duty of boards and directors is being redefined in the 21st
century. The boardroom and its advisors need to unlearn old mindsets, overcome
their biases, and embrace he new governance practices. Society is calling upon
boards to serve the greater good. This requires governance innovation and
leadership from modern boards and others to prepare for and influence the
future.

Published Jun 22, 2022 8am EDT / 5am PDT / 1pm BST / 2pm CEST