Written by Eric Lim, Chief Sustainability Officer, United Overseas Bank (UOB)
The world is in transition, with change happening on many fronts from geopolitics to socioeconomics.
Among these is sustainability, in particular climate change. This issue is not only dominating headlines but also boardroom discussions.
To combat climate change, the global economy will need an entire industrial revolution to achieve net zero greenhouse gas emissions as businesses rethink and transform their strategies and operating models.
As industry and corporate captains, the Board and C-Suite inevitably play an indispensable role in steering this business transformation. A 2022 report by global leadership advisory firm Egon Zehnder on leadership in sustainability action revealed that 27 per cent of more than 300 survey respondents said ownership of
the sustainability agenda was shared by the top team[1]. This finding appears concerning, but it may be of greater alarm that only three per cent of respondents said that sustainability should be owned by everyone in the organisation.
There are two aspects of ownership – accountability and responsibility, with a fundamental difference between them; the former being held by the Board and C-Suite, and the latter, which requires action, shared by all employees. So how should sustainability practitioners engage the Board and C-Suite on the transition strategy and journey so that they in turn will be able to promote a greater sense of responsibility and action among all employees?
[1] Source: Egon Zehnder, Creating a Sustainable World: Are leaders doing enough?, 2022.
Effective engagement within the boardroom for successful alignment
The conventional perception of a company’s success is financial performance and value in terms of profitability and company valuation. However, there has been a mindset shift among regulators and investors in recent years, as more of them increasingly hold the Board and C-Suite accountable for non-financial value that is created or destroyed by the company. In sustainability terms, this refers to the company’s positive or negative impact on various stakeholders, including the environment and the society at large.
According to Egon Zehnder’s report, more than half of respondents agreed that their current corporate culture and purpose need to change for the company to become more sustainable. This is an encouraging signal of the need for greater engagement and emphasis on both financial and non-financial performance within boardrooms, so that there can be effective alignment across the organisation for a successful transformation of the business.
Here are five ‘Cs’ that sustainability practitioners can use to build the compass for the Board and C-Suite in order to navigate the organisational cultural change:
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1. Conviction
At the top, the Board and C-Suite must be shown how sustainability is intrinsically linked to the corporate purpose, as well as business strategies and operating models. This will reiterate the authenticity of the company’s sustainability agenda and the integration across goals, policies and initiatives. This will be the ‘north star’ by which the company will abide as they seek progress that benefits people and the planet.
Education and training on current and emerging trends, expectations, regulations, benefits and challenges are also vital. With increased knowledge, the transition work needed can then be defined clearly to make a compelling business case for sustainable value creation. This includes the rationale, desired outcomes and potential risks and opportunities. The impact on different stakeholders also needs to be articulated – from employees who want to work in purposeful companies and customers who want to opt for environmentally and socially responsible choices, to investors who want to seek out companies with greater long-term resilience.
Conviction will also enable the Board and C-Suite to lead the organisation in fulfilling steward leadership, which is “the genuine desire and persistence to create a collective better future”[2], as defined by Rajeev Peshawaria, the CEO of Stewardship Asia Centre in Singapore and Founder President of the Leadership Energy Consulting Company in Seattle, United States.
2] Source: Rajeev Peshawaria, “ESG: Will G Save Us From E and S Challenges?”, 17 October 2022.
2. Commitment
The boardroom plays a critical role in the implementation of stewardship leadership and accompanying corporate transformation strategies. The top-down approach from the Board and C-Suite sets the tone for how the organisation should and will execute and deliver to the transition. It is an end-to-end process that involves the rethinking of business and operational policies and processes, down to supply chains, in order to serve needs of increasingly sustainability-focused customers, investors and regulators. As such, there must be strong alignment of commitment – that the transformation into a sustainable organisation is not just the responsibility of specific individuals or teams. Every employee has a part to play.
3. Competencies
The entire organisation, regardless of roles, must upskilled or even reskilled for a successful transformation. There must be adequate resources and investments allocated to deepen employees’ knowledge and skillsets so that they will be able to contribute in their own way to the transition. In addition to essential training for all employees, there should be targeted and tailored competency training for those whose are directly responsible for driving the organisation’s transition.
4. Calibration
It is imperative that the Board and C-Suite be kept updated of the transition progress. To this end, there must be targets set, as well clear metrics and indicators established to track and calibrate performance. The ongoing monitoring and evaluation process will demonstrate both internally and externally strong accountability, beginning from the Board and C-Suite, and keep stakeholders informed.
5. Collaboration
Within the organisation, the integration of sustainability should be executed by properly-resourced and clearly-mandated cross-functional teams. This collaborative approach and the relationships built will contribute to organisation-wide consensus around the transition endeavour.
Beyond internal efforts, companies should recognise that entire industries, economies and countries are on similar transition journeys. This is where collaboration with different stakeholders – from regulators and industry associations, to suppliers and even customers – will create a multiplier effect on the impact and outcomes of the transition.
Defining success
Successful engagement with the Board and C-Suite will result in visible demonstration of the company’s stewardship commitment and transition progress to employees, investors, regulators and general public.
Internally, employees will identify with the strategy and understand their roles and responsibilities on the transition journey. They will be inspired and emboldened to take charge of their own learning in order to stay relevant and competent within and beyond the organisation as the world continues to transform and progress.
External stakeholders will also be able to recognise the specific and concrete actions that the organisation is taking for the strategic shift. They will appreciate the tangible and authentic outcomes that eventually translate to stronger commercial returns and reputation.
Using UOB as an illustration of successful engagement, the Board and C-Suite are accountable for setting the long-term goals and strategic direction for sustainability practices, as well as monitoring relevant key performance indicators of both the organisation and employees. They also make sure that there is a right and proper mandate given to drive the transition and transformation.
This mandate is undertaken by the Chief Sustainability Officer (CSO), who reports directly to the Chief Executive Officer and is tasked with overseeing the implementation and integration of transition strategies. The CSO leads a team that, together with a senior-level Group Sustainability Committee, works in a hub and spoke model with various business and support functions, including the wholesale and retail banking, credit and risk, human resources and corporate real estate services teams, to drive the sustainability agenda. The confidence from our regulators, colleagues, customers and investors in the organisation reflects their strong recognition of the embedment of sustainability into our business strategy.
At UOB, steward leadership is rooted in our DNA and it is our deep belief that sustainability must be sustainable and authentic. The transition must also make commercial sense so that the company will stay relevant and competitive for the long term. With a strong sense of conviction and commitment, we will fulfil our purpose to build a better future for ASEAN.