Board Stewardship for a Resilient Business (original) (raw)

Our inaugural report, “Boards: Stepping Up as Stewards of Sustainability”, revealed a paradox: while board members recognized the imperative for sustainability, many felt ill-equipped to act on it. Often feeling as though they are the lone voice on the board, directors may also lack the courage—or their boardrooms may lack the psychological safety—to challenge how long-term risks and opportunities are monitored and addressed through board governance.

Our most recent global survey of board members shows little progress has been made since then. Only about 25% of directors who responded say that they and their peers have adequate knowledge of the risks and opportunities sustainability presents, including those specific to their industries.

In addition, there is still confusion and debate about the term “sustainability” and what it encompasses. At Egon Zehnder, we use the definition of the Sustainability Accounting Standards Board (SASB), which includes environment, human capital, social capital, business model and innovation, and leadership and governance when considering the topic.

Corporate leaders and their boards should hear what critics have to say. They should then explain which sustainability issues aren't important to value creation, acknowledging that some issues may become relevant in the future only if the law changes. Companies should explain what they can and cannot do about their negative externalities and identify areas where regulation is needed.

This lack of understanding combined with a traditional mindset can often lead to resistance in evolving the board agenda, which can put organizations at a disadvantage. Among the many topics competing for board attention, sustainability is often deprioritized to make room for more “of the moment” agenda items. Business decisions with real-world implications can be overlooked, underestimated and undervalued because they slip through the gaps in siloed and traditional governance and culture.

What is stewardship?

Stewardship describes purposeful and responsible leadership that creates long-term value for a business through interconnected, inclusive, and resilient behaviors. This differs from “leadership as usual,” as stewards adopt a systems-wide view, encourage collaboration across a broad organizational ecosystem, and bring purpose to the heart of business performance.

What does this look like in a board member?

A learning mindset, understanding the link between risk, resilience and opportunity. Elevating the level of discussion beyond the short-term horizon and enabling leaders to embed purpose and performance throughout the organization.

Why does it matter?

Adopting a stewardship mindset equips the board with the tools to navigate the challenges of increased complexity. By engaging in horizon scanning for risks and opportunities around societal, regulatory and commercial demands, the board can futureproof the business. By moving away from marketing jargon and buzzwords around culture and purpose, businesses can get back to their raison d’être: To solve problems profitably.

Boards face ever-increasing complexity, and we know that directors are keenly feeling this. The current context requires a different type of leadership, where the board encourages a recognition of the business’ place within a broader system, seeing the interconnectedness of people, planet and profit. Addressing this challenge requires a holistic view of the growing number of stakeholder groups and the competing demands that they place on business leaders.

Boards can add value not through knowing all the right answers; no one has ever faced these challenges before, so it is not possible for them to do so. We look to them to be a circle of elders that brings wisdom. This is informed by knowledge, but it is not trapped by it.

Directors are often operating with good intent and little precedent to guide their behaviors around governance in unchartered territory. Throughout this report, we invite board members to reflect on the barriers that may be holding them back from being the directors that this challenging and ever-changing context demands. There are no “quick wins;” this is a journey that must start from within to build resilience as a director and as a board.

Download the full report

Discover our research on how board members can develop a stewardship mindset to navigate the complexities of today's business environment and create long-term value for the business.