Sustainability in the Boardroom – The Dilemma in 2025 and Beyond

[Thanks to guest contributor Linda Y. Brewer for this article]

As long as sustainability is a bolt-on to the strategy of the organization rather than integrated into business decision-making, it will remain vulnerable to being devalued and optional. 

It is increasingly critical that sustainability be incorporated into the operations of the business, that it be embedded into core processes, and that sustainability expertise in environmental, social, and economic terms, be deployed in the operationalization of sustainability. 

Sustainability leadership in a time of unpredictable policymaking, particularly at the Federal level in the US, and in a time of increased sustainability governance rigor of the EU and California, leaves organizations at a cross-roads to either build smart sustainability solutions (financially enhancing, innovative, cost saving, reputation-building) into operational process or minimize the organization’s efforts in sustainability in the face of competitors’ actions.

Boards of Directors (Boards) are increasingly at the forefront of sustainability leadership, as it is an intensifying part of their fiduciary responsibilities and individual liability. As Boards look at optimizing the future options of their organizations and recognizing the myriad of global influences and regulations that they (or perhaps their customers) must adhere to, Boards must step up their guidelines on sustainability, to help their organizations filter out the noise and focus and to be ready when change as needed.

In order to step up their guidelines and support executive decision-making, Boards must: 

• Understand sustainability and climate basics for their industry from both a risk and opportunity standpoint; 
• Consider the very real implications for the future of leadership, channels, products, customers, and suppliers; 
• Appreciate the very real current and future financial implications for themselves and adjacent industries; and
• Recognize the ways that organizations naturally will resist the change of embedding sustainability into their processes.

This framing is critical if Boards are to guide the organization in placing bets on a future where the governance of sustainability is simply a part of (and not separate from) resilient organizational leadership. 

For organization to make optimal decisions for their operations, the Boards must lay down guidelines regarding sustainability, guidelines that can move the organization beyond the potential drag of their existing culture and create a competitive differentiator, particularly given the pressures of conflicting emerging regulations in some geographies and lack of regulations in others. Those guidelines depend heavily on the business, the industry, the executive team, and the expertise that either exists on the Board or is brought in on a temporary basis.

Digging into the Organization’s Value Chain – Asking the Right Questions of the Executive Team

The questions the Board must ask begin with the engagement of leadership, understanding their expertise, any gaps in their understanding of sustainability, and their in-house sustainability expertise. In order to as the right questions of leadership, the Board must have their own independent understanding of sustainability and how it intersects with the organizational strategy. 

Bringing in a third party to do fundamental sustainability education in concert with the organization’s internal experts and strategists, will lead to understanding the interplay of sustainability within the organization’s leadership, channels, products, suppliers, and customers.  

Possible early and often overlapping questions that the Board may seek answers to include:

• Channels. How are our competitors using sustainability to differentiate themselves within the industry? What are they actually doing that involves sustainability (not that they are claiming to do)? How are they using sustainability to create new markets for existing products? How are they using sustainability to create new markets, new customers, new channels?
• Products. How does sustainability intersect with our existing products? Can considering sustainability impacts improve our existing product set? Can embedding genuine sustainability considerations into our products make them more robust, more easily recyclable or returnable (for parts reuse), last longer, attract more and create returning customers, build or enhance our existing reputation? Can we offer an option of a sustainable product and charge a premium, creating a new channel?
• Suppliers. Which of our suppliers are already focused on sustainability within their offerings? How can our suppliers help us build more sustainability products? Can our suppliers prove that they have more sustainable offerings? How do we use the sustainability of our suppliers to gain reputation, efficiencies, new customers? How do we help our suppliers to optimize their sustainability impacts on our products?
• Customers. How can our customers use our sustainable products differently? What are the unique offerings that sustainability adds to our products and how would that attract more or different customers? How can we engage our customers in returning products to us for recycling, part reuse, or waste reduction? Which of our customers cares about sustainability? What new customer sets can we attract based on our sustainability strategies?
• Operations. How does considering sustainability enhance operational efficiencies? Are there cost savings associated with the sustainability of our products? Can we design and develop new products at a lower rate and an expedited timeline base on the consideration of sustainability? Can we operate our assets with a lower cost based on sustainability decarbonization?

By becoming a Board that can ask the right questions, offer those questions as guidance to the organization, and continue to update those questions as they look to the future of the organization, the Board will deliver on their fiduciary role and actively and consistently move their organization forward.