27 November 2023 – In this blog, Dr Mario Abela, Course Convenor of the new Governance for a Sustainable Future 8-week online course, describes the challenges businesses face in today's sustainability crisis, the imperative to act, and how governance can be the engine of change.

Rewind two millennia; Aristotle suggested money had no ‘value’ unless it led to wellbeing founded on equity. Whilst he would not have used the phrase ‘sustainable future’, his view would have resonated with the notion that organisations must contribute to human flourishing. He was clear that money (and profit) was to facilitate exchange and no more[1]. He argued money was a means to an end, not an end in itself.

The challenges today’s business leaders face include demonstrating how they are navigating significant changes while also contributing to human flourishing. A stark light is being shone on business, particularly on decision-making that leads to externalising harmful costs on nature and society to maximise financial returns. This decision-making is no longer fit for purpose as it creates liabilities that undermine the business’ operating context (the social, environmental and economic systems that businesses depend upon) and conceals opportunities[2]. Additionally, society[3]and the environment[4]are starting to 'send the bill'[5] for destructive business practices in a way that cannot be ignored.

While businesses remain under pressure to deliver quarterly returns, the operating context is rapidly shifting, raising the question of the role of business[6] in society[7].  For example, even before we look at the disparities in wellbeing between the Global North and Global South, we can see these tensions and conflicts at play in the UK today. A recent study[8] found that 3.8 million people experienced destitution in the last year (2022). Definitions are important here; destitution means “people struggling to afford to meet their most basic physical needs to stay warm, dry, clean and fed”. In the same week, Lloyds Bank Group announced pre-tax profits for the nine months ending September of £5.7bn (a 46% increase)[9]. These extremes reflect how businesses are caught between delivering financial returns and meeting society’s changing needs and expectations[10].

What has been the response to these unsustainable challenges?

In 2015, the United Nations Member States adopted the Sustainable Development Goals[11](SDGs). The SDGs are an agreement among 178 countries to end poverty, and deprivation, improve health and education, reduce inequality, and spur economic growth.  

With these commitments comes a prevailing fallacy that someone, somewhere, is making progress. However, as Antonio Gutteres, UN Secretary General, recently noted, “only 15% [of targets] are on track, while many are going in reverse”, adding that the SDGs “aren’t just a list of goals. They carry the hopes, dreams, rights and expectations of people everywhere”. 

Business has a key role to play in delivering the SDGs.  Under Goal 17, ‘Partnerships for the Goals’, business was expected to play a prominent role in driving towards a sustainable future as governments recognised that they could not carry that load alone.

Additionally, the 2023 Edelman trust barometer[12] revealed that; “business is the only institution seen as competent and ethical”. It remains an expectation from governments and civil society that businesses must play a leading role in delivering the SDGs.

As well as avoiding liabilities, the SDGs present a significant opportunity for businesses to deliver unmet needs through innovative products and services[13], with estimates[14] of $12 trillion of business opportunity in just four areas across the SDGs. 

But how do businesses remain profitable while demonstrating that they are part of the solution and not the problem? Growing regulation and disclosure will require businesses to answer this question.

The governance opportunity

Governance sits at the heart of a business’ ability to minimise risks posed by these challenges and capture the opportunities they present.  It can be defined as the ‘human-based system by which an organisation is directed, overseen and held accountable for achieving its defined purpose’[15]. At their core, business practices that destroy social and natural value are ones of poor governance – stemming from decision-making that optimises short-term financial value creation. Recognising this also helps to understand the opportunity good governance offers. It enables businesses to establish a direction that creates value through a distinctive contribution to a sustainable future and sets the parameters needed to achieve the goals. It provides the link between setting goals and the actions required to achieve them. 

Some of the building blocks of good governance are emerging.  For example, ISO 37000 provides the first standard for organisational governance.  Similarly, PAS 808[16] is the first standard for Purpose-Driven Organisations, setting out the worldviews, principles and behaviours of these organisations. These are useful tools to help leaders respond to challenges.

CISL has also developed aBusiness Transformation Framework[17] that helps organisations understand their current performance and inform their business transformation journey.  However, there are still far-reaching governance implications for businesses that want to transform to be relevant and resilient in the future.

CISL’s new online course, Governance for a Sustainable Future, explores these implications. In this course, learners will understand how the power of governance can be unleashed to create strategies that profitably contribute towards a sustainable future. 

We must stop and take stock, decide to act, not react, and use what we know to get to the underlying issues to innovate and create new opportunities and propositions. Failure to do so risks stalling important governance decisions to the next board or someone else’s watch,  who will only face even greater, more costly challenges and decisions. Good governance won’t just extend and enhance the life and prosperity of the corporation but also those of the future generations on which it depends. As Aristotle would counsel us today, there’s no escaping the need to clarify what ultimate end or ‘good’ we serve.  

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