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How Can Companies Sustain Sustainability?

November 17, 2023 by KPMG

Global discussions on sustainability have assumed a tenor of greater urgency, alongside a growing movement among companies to commit to ESG in their business. In the flurry of conversations about how companies should responsibly address critical environmental and social issues, it is easy to neglect the question of how companies can sustain sustainability. What does it mean to think and act strategically so that corporate sustainability initiatives can create genuine impact in the long term?

This question was explored at length during the Asia Venture Philanthropy Network (AVPN) Conference 2023, in the session “Achieving Sustainability Through Corporate Governance and Portfolio Management”.

The session was led by Francesco Valente, investment director on the risk capital team at Global Innovation Fund. I was joined on the panel by:

During our conversation, it became clear that sustainability initiatives should rise from the blueprint of corporate governance and sound portfolio management. Without these fundamentals in place, companies may be hard-pressed to create lasting social and environmental impact.

Changing businesses from the top

Corporate governance maps out the principles and practices that a company abides by to execute business. It lies at the heart of everything that makes a business tick, no matter the industry. It therefore makes sense that any push towards sustainability originates from corporate governance, and more importantly, is ingrained in the very ethos that governs the boardroom. Companies’ new proposition matters for long term value, corresponding to systematic transformation needed for tackling pressing global top risks in sustainability. If companies are to make a real difference with their ESG initiatives, commitment to sustainability must cascade directly from the board and the executive committee to every level, function as well as BUs, and every jurisdiction the organization operates in.

A top-down approach is therefore needed to guarantee bold, targeted and decisive action in favor of sustainability. Unless there is clear and dedicated decision-making from the top, ESG efforts can easily run the risk of being piecemeal with little direction and nominal impact. Sustainability-focused leadership can enable the entire corporate structure to fully support social and environmental initiatives in a strategic and deliberate fashion. By adopting sustainability reforms from the top, a company can modify its corporate DNA to fully integrate ESG commitments into every business design, so that sustainability lies at the centre of all organizational decisions.

This is what I refer to as institutional reform, and it is incumbent on corporate leadership to set it in motion from the boardroom. The board and executive committee should use corporate governance as the primary instrument for implementing sweeping, sustainability-geared changes across an organization. These include creating a structured sustainability management system — no matter the size of the enterprise —so the entirety of the organization can transform towards a low-carbon economy, which too comes with a plethora of opportunities.

Caring for the triple bottom-line

Building a fully operational and thoughtfully designed sustainability management program system is only the beginning, however. Sure, a company may have a corporate sustainability office and a dedicated sustainability officer in its organizational chart. But such changes amount to no more than window dressing unless the company recognizes its business targets must be modified to reflect sustainability in every aspect of operations. I’m talking about expanding the bottom-line, so that it accounts for so much more than profit generation.

What is needed is adoption of and accountability towards a triple bottom-line:

  1. The economic bottom-line;
  2. the social bottom-line; and
  3. the environmental bottom-line.

A profound flaw in corporate governance is that executive committees often aim low at short-term corporate sustainability targets, not long-term, multi-year KPIs. Now, more than ever, it is critical corporate leaders envision long-term ESG targets for their organizations, and redefine company performance value according to an organization’s social and environmental impact.

Move with urgency

It isn’t enough for these targets to aim for the long term; they must also be ambitious to match the urgency with which environmental and social action are to be approached. The world is teetering on the cliff-edge of a climate crisis, and strong interventions are now necessary to avert further losses. To systematically transform the global economy from its high-carbon orientation to low-carbon orientation, or even net zero, corporate leaders should transform their own organizations so they can create maximum social and environmental benefit.

Where the world benefits, companies benefit even more. This is what corporate governance should articulate: that sustainability is the ingredient that can give businesses a competitive edge, and that it is sustainability that holds the key to any organization’s future. As urgent as the conversation on climate change is, there must be quick and decisive action around it from the boardroom to the supply chain, or even value chain, all the way to workers on the ground: action that produces results, and meaningful impact.

Author Niven Huang (pictured, top of page) is head of ESG for KPMG Asia Pacific. Read more KPMG blogs here.

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