Business Accountability

Board Oversight

Formalize corporate board oversight of sustainability risks and opportunities, and integrate these issues into board decisions on strategy, risk and revenue.

Actions

Corporate boards formally oversee sustainable business strategies and performance and integrate material and salient sustainability risks and opportunities into board discussions and decisions on strategy, risk and revenue. All board directors are informed on the material and salient sustainability priorities for the business and are able to evaluate those priorities in the context of short- and long-term strategic decision-making. Sustainability fluency at the board level is achieved by highlighting relevant criteria in the director nominating process, continued director education and regular engagement with external experts and stakeholders. 

Getting Started

Unlike the Critical Impact Actions, the actions within Business Accountability do not have milestones leading to 2030. Each company already has the ability to begin taking or continue integrating these actions today.  Rather than taking iterative steps over the next 10 years, companies should prioritize strengthening their corporate systems and equipping themselves with the tools to address risk and capitalize on opportunity as soon as possible.

This section of the Ceres Roadmap 2030 identifies a list of resources to help companies further integrate sustainability into business accountability.

Ceres: Running the Risk - This report provides guidance to corporate boards on how they can effectively oversee risks posed by ESG issues, including questions for directors to ask management throughout the risk identification, prioritization and mitigation processes.

Ceres: Lead From the Top - This report identifies the skills and experience needed for board members to provide thoughtful oversight of sustainability risks and opportunities, as well as the tools and processes that can help foster deeper engagement at the board level on these issues.

Ceres: View From the Top - This report leverages interviews conducted with dozens of corporate directors, senior corporate leaders and governance experts to explore how effective board engagement can produce tangible, positive environmental and social impacts.

Ceres: Getting Climate Smart - This report is designed to help corporate directors understand why climate change is a board-relevant issue, when climate change should fall within their mandate and how they can oversee climate-related risks and opportunities.

Business and Human Rights: A Five-Step Guide for Company Boards -  This short guidance provides “need to know” information for company leaders about how to meet the UN Guiding Principles’ expectations of doing business with respect for human rights. 

National Association of Corporate Directors (NACD) - A nonprofit membership organization for corporate board members, the NACD elevates board performance by providing board members with practical insights through world-class education, leading-edge research and an ever-growing network of directors.

5 Steps to Tying Executive Compensation to Sustainability -  Five steps on how companies can link sustainability incentives to executive compensation. The steps allow boards and management teams to create incentives that signal their commitment to sustainability.

Principles For Responsible Investing: Integrating ESG Issues into Executive Pay - These principles provide a tangible tool for guiding dialogue between shareholders and investee companies about how to integrate environmental, social and governance (ESG) factors into executive pay.
 

Companies in Action

General Motors embeds sustainability oversight at board level and fosters diversity among directors. Corporate boards cannot make smart decisions on risks and opportunities without being fluent on sustainability priorities facing a company and its industry. At General Motors, the board is committed to providing oversight for sustainability through its Governance and Corporate Responsibility Committee (GCRC). For example, the GCRC recently reviewed the company’s ESG strategy, with a broader focus on corporate purpose and culture and how those attributes align with the company’s corporate strategy. Additionally, several members of the broader GM Board of Directors have expertise in ESG- and climate-related issues, such as transitioning from high- to low-carbon emitting technologies and managing environmental impacts within the supply chain. Furthermore, ensuring gender diversity at the board level is a priority for the company--the current board composition is 55% female.

Nike establishes a corporate responsibility, sustainability and governance committee to work with management on the integration of sustainability into the company’s business. Understanding the importance of sustainability to the business, Nike has created a board committee with direct oversight of sustainability, including environmental, social and political impacts.  Meetings are staffed by the company’s Chief Sustainability Officer and the Chief Operating Officer and typically include the review and evaluation of key sustainability issues as they relate to business functions and progress against those issues. The committee is also responsible for protecting the corporate reputation and matters important to their stakeholders, including employees, consumers, customers, suppliers, shareholders, governments, local communities and the general public. Executives regularly appear before the committee to discuss how sustainability and business strategies are aligned and how this is reflected in the work of the teams that they lead.

Prudential Financial seeks to recruit board members with sustainability expertise. At Prudential Financial, the board's Corporate Governance and Business Ethics Committee has oversight for the company’s sustainability risks— including climate risk—in alignment with the Task Force on Climate-related Financial Disclosures (TCFD) governance expectations. To successfully integrate these issues into board discussions and decision-making processes, the company recognizes that it needs to ensure that directors are fluent in the ESG issues facing its company and the broader industry. Looking to build out this expertise, Prudential has included experience in sustainability within its board skills matrix, recognizing it as as a core skill for board members. Prudential’s latest report indicates having four out of 13 directors with this level of expertise. The company notes that experience in these issues strengthens board oversight and assures that strategic business imperatives and long-term value creation for shareholders are achieved within a responsible and sustainable business model.

Regions establishes formal board oversight of ESG issues and actively engages board members on sustainability priorities. In 2018, the financial services company formally assigned responsibility of environmental matters and corporate responsibility to the Nominating and Corporate Governance Committee of the board—in addition to having all committees oversee certain aspects of ESG. The company’s latest sustainability report provides an overview of key sustainability issues discussed by the board in 2018, which included Region’s Human Rights Statement, an environmental sustainability policy statement and related environmental goals, among other priorities. To ensure board members provide effective oversight of sustainability priorities, Regions includes 'environmental and sustainability practices’ among the skills represented by directors on its board, and reported that one-third of its board members have this kind of expertise. Furthermore, all directors participated in 2018 in an educational seminar led by Ceres on the role of boards in overseeing ESG matters.