One of the things usually approved at the constituent board meeting after every company AGM are the board of directors' ‘Rules of Procedure’. What looks, and is often perceived, as a formality though, at close looks carries not just formal weight, but indeed formulates – directly or between the lines – the duties of the board.
What do these rules typically enshrine - and what not?
Unless the top line of company executives are held accountable for and judged by their contribution to the company’s risk management and mitigation efforts, including importantly CSR and sustainability performance, the company will struggle. Without senior commitment and engagement, the system only ever allows for minor ‘bug fixes’.
In the last post I explained what COP15 is: A conference with the main purpose to adopt the post-2020 global biodiversity framework. But: What exactly is the framework agreement? What does it cover and encompass? Does it offer similar KPIs such as the SDG indicators? Are there enforcement mechanisms? Assuming for a moment, that it will be adopted: what would, or could, that tangibly mean going forward? Here a try at answering these questions.
The KISS Principle is a design principle that stems from the 1960.
It originated in engineering and its view point is that most systems work best if they are kept simple rather than made complicated; therefore, simplicity should be a key goal in design, and unnecessary complexity should be avoided.
But what about complex systems such as nature?
How simple can we go before oversimplification results in incomplete, or biased data? Before absence of consideration of relevant factors inherently lead to regrettable substitutions? And before we willingly accept that there will be collateral damages to a decision, without knowing (or wanting to know) of what nature and in what order of magnitude these may be?
One example that illustrates where this challenge may rear what is its ugly head: upcoming Swiss political referenda on agricultural practices.
The COP21 Climate Agreement that was reached this past December in Paris, and which comes into effect in 2020, is a milestone in global sustainability efforts.
Yet - are we doing enough? What is enough?
CEO pay is an ongoing topic. Stock options are a regular part of their pay package.
The way CEO pay packages handle stock options may foster short-termism. Or contribute to remedy it. Some thoughts.
Expertise is a key discussion topic when it comes to board composition. Not only during the hiring process, but also when looking at the tenure in and renewal processes of board. According to a recent article by Board Agenda: a number of risks that have raised Directors & Officers concerns, and even litigation. These include [...] climate change and environmental issues; the #MeToo movement and other societal risks and merger objection litigation. Hence the question is: How sustainability (ESG) savvy and capable are boards?
On September 12 to 14, I attended the European Business Ethics Network (EBEN) yearly conference in Lille, France. The theme of this year’s edition was ‘License to Operate’.
I and my colleague Ilaria Pasquinelli, both presented a research paper, focused on sustainability and value generation in the fashion industry, and the status quo of knowledge on sustainable consumption habits respectively.
The influence of decision bias is nothing new when scrutinising corporate governance. And yet: by and large businesses continue to fail to adjust their strategic decision-making processes to become more climate viable. At best they have just barely started on their journey. Why is that? As we look deeper into the corporate discourse on Climate Change, it becomes evident that one of the silent yet crucial culprits behind the climate change inertia lies in the cognitive biases at play in corporate decision making. What are those biases, what do they mean for boards in the context of strategic Climate Change decisions, and what can be done about it?
Of the close to 500 eco-labels that exist worldwide, just over 100 apply to textiles, according to the Eco Label Index. Behind each label is, or should be, a standard that backs up the claim being made.
Given the prevalence of standards, the following questions arise: Why do standards exist? What value do they deliver? What are their limitations? What is ‘best practice’ for standards, their development process? What about the proliferation of standards?
The Manifesto of a Hummingbird: . 13 + 1 ways to make a stance for responsible business and leadership.
In Europe, SMEs make up 99% of all companies, and provide 67% of employment a much higher percentage of jobs in developing countries.
Research has shown that they generate around 50% of the private sector’s turn over, and that SMEs contribute at least 80% to the national GDPs.
Yet less than 20% of policies, government investments etc. are made with them in mind.
Many of the most important resources our current civilisation depends on – all of them finite natural resources - form part of what historically would have been called ‘The Commons’. And yet, many of them are economically treated as 'income' and not the valuable and finite 'assets' they are. That again is the tragedy of the commons.
In time for Christmas, one of the most historic inter-governmental landmark decisions hit the headlines: The 'Biodiversity' COP (COP15) had actually achieved 'something'. 200 countries had agreed on 4 Goals and 23 Targets. Some of those are a bit more concrete than others, the headline goes roughly like this: “By 2030: Protect 30% of Earth’s lands, oceans, coastal areas, inland waters; Reduce by $500 billion annual harmful government subsidies; Cut food waste in half.” A closer look at precisely those 23 Targets and the specificity of the measures they contain.
This time around I want to make it explicit: If a company is not performing in sustainability terms, it as good as always down to senior leadership. Both, executive leadership – CEO, COO, CFO, CMO,
CSO etc. - as well as non-executive leadership at board level.
For one, arguably simplistic, reason: sustainability deliverables are oversteered by
‘higher priority’ KPIs. And what does mean? Fundamentally, it is down to decisions where the ball stops at the top leadership level.
Do you recognise these scenarios?
We need new business models that are not predicated on selling more stuff to more people.
And because in the 'Here and Now', there is truly not much more to say, I could finish with the above quote.
Except that: Those ‘new business models’ are not reality. Far from it.
About the Role of the Board in the 'Why'.
You can't manage what you can't measure. This often cited quote by Peter Drucker lies at the heart of many things: change management, quality management, staff diversity, environmental footprint, CO2 output … you know it. This is why many millions of dollars, and countless hours, have been invested in creating suitable measurement tools. It's just that: Measurement ≠ Data ≠ Information ≠ Knowledge ≠ Action.
Europe is, no doubt, a checker board in regards to environmental (and other) legislation and jurisprudence.
While the European Union is is hammering out the different fence poles related to its Green Deal and Green Taxonomies some other countries run ahead with their own locally applicable laws.
One law that is considered 'innovative' since its publication - the French 2019 Law on Energy and Climate, and its 2021 implementing decree - are worth a somewhat closer look. These pieces of law focus - once more - predominantly on financial industry players and reporting. The innovative part is the explicit inclusion of Biodiversity impact reporting. What are the bets of them beeing at the root of change?
This post is going to be somewhat more personal than how I usually write. Normally, I try to write and argument as factually and data driven as possible. I’m not one that feels comfortable to carry my emotions on my sleeve. And even less as some of the topics I write about are truly important to me.
But: There are a couple of things that upset me in the present. They related to the #blacklivesmatter movement on the one hand, but maybe more specifically to the related discussion on #racism – globally.
-> Includes a list of practical resources for corporate boards
There are two approaches on how we can define of what is viable and desirable for our global economy.
In one, the 'soft attributes' and non-physical factors such as consumer desires, lifestyles or distribution of goods are a fixed attribute. In the other, quantifiable, physical attributes - amongst them natural resources - are fixed.
The challenge of boards in this time and age: Recognising that the first - the present - is failing. And outlining the path towards the second.