Good governance relies on a structure or framework to clearly articulate and house the systems in which business activities take place. A key dimension of this framework is supervisory power, a watchdog or authority which ensures that decision-making at executive level doesn’t betray the long-term vision nor the overall entity. We’ll examine this through the lens of an organization for whom the sustainability of its economic health takes precedence over short-term profitability. Such an approach will allow us to identify the key features of a supervisory power with sustainability at its core and go beyond the framework of conventional governing bodies, identifying every watchdog involved in sustainable performance.
First, some semantic concepts which build a picture of the situation we face today. The word economy, from the Greek oikos (house) and nomos (to manage), refers to the smooth and continued running of our common home. For a company evolving in a globalized economy, this common home is the planet and its resources, but in standard corporate governance structures, caring for our common home is not a given. To paraphrase Aristotle, we have greater regard for what we own than what we share with others, leaving the latter to suffer in the pursuit of the expansion of the former. The outcome: our house is burning, and we are turning a blind eye. How we respond to this will be crucial to the ongoing survival of our home, and the role companies play is profoundly influential. Let’s examine the key owners and supervisors of sustainable performance workstreams within organizations.
If economy is the running of the common home, ecology — from the from the Greek oikos (house) and logos (logic) — is the reason for this. Regulation (economy) flows from digestion of logic (ecology) and to understand the logic of an infinitely complex system, we rely on subject-matter experts, locals, prior experience, research, evidence, knowledge-sharing and science, among other things. Put simply, a collective of diverse minds and differing perspectives to drive a sound decision-making process.
A collective of this nature will be best placed to identify the shortcomings and pitfalls of a management structure, should indeed such shortcomings exist. “As the contemporary world is now so complex,” says entrepreneur Emmanuelle Duez, “it requires the framework of thought to be multiplied. It requires more brains to be involved in making decisions, but also and above all, brains that are radically different.” As per Ashby’s law, the diversity of an organization’s governance must be proportional to the complexity of the environment in which it is evolving.
And what does this look like in practice? One example is global early childhood education company Babilou Family, who engaged scientists in cognitive sciences, biology and child psychiatry in the establishment of its business plan and in building the roadmap to achieving the company’s goal of sustainable education.
BEL group took a similar approach, teaming up with NGOs whose expertise and credibility could bring authenticity and rigor to the company’s ambitious commitments. “We needed external expertise and, above all, we needed a trusted third party who would not serve any other interest than the common interest,” explains Managing Director Cécile Beliot, when talking about BEL’s partners who include WWF and CIWF. Impartial watchdogs, such as the groups and individuals outlined in these examples, provide guidance to organizations’ senior leadership or decision-makers, free from the tension between purpose and profit, and focused only on the promotion of the common home.
Now that we’ve looked at who, let’s examine the what and how. The nomos, the management, is necessary to guide, enable and, as needed, prevent actions. Management is what the supervisory power is doing. And yet, if nothing exists until it is measured, then measurement is the how. If there is no regulation without set limits, no informed use of resources unless they are accounted for, then the accounting and the measurement also ensure the management respects the governance framework.
Lack of regulation and of unified measurement is also the crux of the problem facing managers today. “If we look at carbon alone, which is the most controlled metric to date, we can observe differences of 40-80% depending on the accounting methods used. Imagine what it is like for biodiversity!” recounts Bertrand Badré, former Managing Director of Banque Mondiale. “There is purpose washing even in environmental accounting and it is very difficult to impose global standards,” he continues, “the system still does not reward the virtuous and sanction bad actors.”
Nevertheless, according to some, the solution to better regulation and supervision of companies to prevent the outcome Badré describes, is a rang on the ladder towards success: collaboration of actors across industry.
One such proponent is former Unilever CEO Paul Polman, who articulates this like bearing the weight of the responsibility together. “No individual company can do that alone,” Polman explains. “It is necessary to form alliances… in government, civil society and the private sector.” B Lab co-founder and ambassador Marcello Palazzi concurs. “A collective group of companies must lead the way down the new path,” he says. Through the combination of our collective strengths, game-changing companies can pave the path towards a new norm, a tipping point that will then encourage other organizations follow.
Finally, there is one internal watchdog with significant supervisory power: corporate culture. To put a company on the path to sustainability, the human component is an essential stakeholder and a crucial driver implicated in both commitments and actions. “If you want sustainability to be ingrained in the values of a company, you have to drive behavioral change, and you can’t do that by simply just setting targets,” says Polman.
The values of your organization define the activities that you undertake, the stakeholders and consumers you serve, the communities you engage with, and the standards you both set and accept for all those interacting with and on behalf of your company. Values act as ethical guardians, and when they’re defined in such a way to be lived and embodied by those within the company, they function as a frame of reference for decision-making and action. Align all parties around your values and the supervisory element becomes decentralized, belonging to every entity involved.
Of particular focus in this regard is the youngest cohort of the population; those who are active participants in the economy dedicated to ecological transition. Embodying the issues that young people seek to impact is important both as an employer and an actor with a product to sell. Young people want to be active in strategic decision-making and have a strong desire to see change, and to change their consumption too. “Young people have always brought a fresh perspective and a desire to change things,” says Director of HR at Garnier International and new brands at L’Oreal, Carine Delliere. “The difference may be that to day the most important issues are non-negotiable.”
And these young people might be the most important supervisory power of all. Saddled with a desire to see change and on the right side of time, they just might be the ones who achieve the necessary transitions that deliver a virtuous sustainable footprint for future generations.