Stephen Martin, Director General of the Institute of Directors, places high importance on corporate culture: “Public trust in business has been rocked in recent years by several high-profile corporate failures. Regaining trust begins with ensuring the right culture is being set at the top of companies. As this report highlights, 85% of the value of leading businesses is in the form of intangible assets. With increased scrutiny on how a business conducts itself in relation to a diverse range of stakeholders, getting culture right is no longer just the right thing to do, it is essential for long-term success.
Setting the right corporate tone from the top is seen as by far and away the most effective way to influence the culture in today’s businesses. Lead by example, and others will follow that lead. But research among European company board directors reveals that this belief is not being reinforced by action on how their businesses behaves. The research also shines a light on the mismatch between words and deeds – it is to be hoped that the emphasis that is placed on the tone from the top, especially in the role of chief executive officer, will rapidly spread around the boardroom table and into the business. Understanding both the desired corporate culture and that which exists in practice is vital if a board is to provide effective leadership and direction to the business. Many boards need to assess whether their information on cultural issues is sufficiently comprehensive, structured and subject to independent scrutiny to meet their current and future needs.
Sustainability is very high on the boardroom agenda, second only to financial performance. It is not enough for boards to just be aware of and express a commitment to sustainability, they now need to demonstrate that they are willing to act positively to ensure their words are matched with actions. It is imperative that the issue is built into recruitment, education and reward processes. Boards should be scheduling time for fundamental discussion about corporate purpose and what value means to your organisation; acquiring in-depth information on sustainability performance for your board; looking for sustainability expertise and mindset when appointing new board members; and explicitly integrating sustainability into board committees and board member duties.
Businesses need to be on top of sustainability if they want to be seen as a modern, forward-looking firm. Many organisations are rising to the challenge of creating a sustainable business as pressure grows from multiple stakeholders, but there appears to be a wide diversity in approaches to sustainability. There is a risk that different approaches will lead to inconsistency of delivery – a lack of consistent understanding and measurement could create a false impression of success, leading to complacency and the risk of underestimating the impact of sustainability.
Key questions for boards
1. What is the board-level understanding of culture and sustainability?
2. What is the board’s attitude towards sustainability? Is it part of market positioning, a means in itself or part of the organisation’s wider purpose?
3. What weight is given to sustainability compared with other corporate issues such as financial reporting, risk management, productivity and cultural change?
4. Where does responsibility for sustainability lie at board level?
5. How is oversight of sustainability managed?
6. How is sustainability integrated into wider risk-management processes?
7. How is the organisation’s sustainability agenda communicated to stakeholders?
8. Is culture and sustainability considered as part of any investment decision?
9. Where are the greatest sustainability risks and opportunities?
10. Does culture and sustainability form part of a recruitment, retention and reward strategy?