Boards can no longer think of sustainability in such narrow and traditional terms. As our recent episode with Nasdaq’s Evan Harvey revealed, today’s corporate directors generally associate sustainability with little more than emissions and political spending—a perspective that is soon to change.
“Sustainability is a metrical and data-driven effort if you really break it down,” says Harvey. “We’re talking about key performance indicators for companies.” With investors making decisions based on sustainability metrics (using tools like the Bloomberg Terminal), boards would be wise to consider these data metrics in their own operations. So where to start?
Three Steps Boards Can Take to Begin Focusing on Sustainability
1. Consider creating a sustainability committee.
Why? With sustainability increasingly becoming a part of corporate performance measurement, boards must be aware of the forces at play. Awareness is key. This committee need not undertake a massive reporting measure; rather, they’re tasked with monitoring the environmental, social, and governance (ESG) sustainability factors on an on-going basis. This committee should keep the whole board informed on the components of sustainability, specifically as they relate to the organization and board strategy.
2. Formalize an annual report on ESG performance.
Harvey strongly suggests formalizing an annual (maybe even quarterly) report on sustainability performance. Arrange for the company’s VP of sustainability or someone from the facilities/environmental side to meet with the board. This person should report on the company’s sustainability performance, outline current and future initiatives, and answer any questions the board may have. This is where the dialogue should happen between the board and management.
3. Conduct independent research.
The board should answer its own sustainability questions, says Harvey. Boards have the capacity to undertake their own research related to environmental, social, and governance performance. How does our company compare with peers and competitors? What are they doing that we’re not doing? What does the next five to 10 years look like? Good boards investigate; they don’t take one person’s word for it.
Keep in mind that sustainability is a long-term concern. Following any research, boards should be setting long-term goals, along with benchmarks they hope to achieve along the way. For more information on corporate responsibility, check out Nasdaq’s resources here.
For more insight from the Nasdaq team, check out our episode with Nasdaq’s Corporate Secretary and Investor Relations Officer: Keys to Maximizing Your Shareholder Relations Team.