Investors and businesses are under high pressure to increase their climate efforts, as the latest report from the UN declares code red for humanity. Boards Impact Forum hosted a webinar on the topic of ownership in relation to sustainability and climate change – how do different owner perspectives tackle this question and their climate responsibility?
In the webinar, Morten Huse, Professor at BI Norwegian Business School framed the topic. A moderated discussion followed with Viveka Hirdman-Ryrberg (Communications & Sustainability Director at Investor, Board Director at SEB Investment Management), Christoph Vitzthum(Chair Konecranes, Varma, NED at Nordstjernan & Oras Invest and CEO at Fazer), and Jens Schlyter (Deputy Director for sustainable business for state-owned enterprises in the Swedish Government and Board Director at Svenska Spel). The webinar was moderated by Jakob Stengel,Board Member at Boards Impact Forum.
Going from micro to macro level in sustainability
One of the challenges we face today is going from micro to macro levels in sustainability. Companies need to work together with other actors such as academia to understand the challenges in the world so that we can shift from sustainability at one’s own company to understanding the impact a company has. A board is never just a board – we need to know the different types of boards and their entrepreneurship strategies. We need to wear different sets of glasses to see what perspective we have when we approach boards and try to understand their role.
“We need to shift perspective from the individual to the societal – from micro to macro – when it comes to sustainability.” – Morten Huse
Moving away from sustainability strategy to sustainable business strategy
Regardless of the ownership structure, it is becoming increasingly clear that boards need to move away from sustainability strategies and into a more mature way of thinking – namely, sustainable business strategies. It is a journey that often starts with sustainability reporting but moves into sustainability integration through the strategy process.
“We see a journey from sustainability reporting to sustainability integration through strategy” – Jens Schlyter
For the Swedish Government, key tools and processes for active board engagement include targets and tracking, owner dialogue, transparency requirements, and a dedicated investment team for each portfolio company. A board will have to adapt these tools based on the specifics of the company and its ownership structure. Boards need to be clear on expectations and integrate the sustainability process throughout the entire company, setting the tone from the top. Sustainability goals that are achievable and internal competence are also vital for change.
Figure 1 Swedish Government State-Owned Companies Stewardship
Sustainability as a tool for long term value creation
As one of Europe’s largest owners, Investor AB sees sustainability as a tool for long-term value creation. Several vehicles were highlighted as essential to guide the boards and management on the topic from the investor side as;
- A clear governance model with defined roles between owner, board, and management
- Working in the nomination committee for active influencing of board member selection
- Ensuring that the board is clear about which areas are material to the company, that sustainability becomes integrated into the business model, and align tangible KPIs to handle the progress.
- Maintain a sound financial position to help facilitate agility.
- Have clear value creation plans for the next 3-5 years, including automation, digitalization, and sustainability.
- Monitor the progress with a traffic light system
- Have an ambitious and active position on sustainability also at the owner company.
Investor AB has defined ten sustainability guidelines that are important to them as owners and requests their companies to follow them.
“Our sustainability work, it’s about the long-term competitiveness in the companies we are engaged in. We see it as a way of future-proofing our companies” – Viveka Hirdman-Ryrberg
Long-term versus short-term owners
For long-term owners, the focus is on long-term value creation. Hence, it is easier for boards in companies with long-term owners to consider sustainability, as the sustainable approach is not always equal to immediate shareholder returns. To force companies with a more short-term perspective to change, regulatory measures or voluntary actions may be needed. Regulation on sustainability is complicated and slow, while voluntary initiatives that show leadership are more agile and can create faster results.
“More and more, companies realize that sustainability is good business” – Christoph Vitzthum
There is also a talent aspect: stakeholders such as young talent expect much more from companies than before. If a company cannot deliver sustainable solutions, the best talent will look for work elsewhere.
To learn more and join Boards Impact Forum
The full presentation from the event can be found here
The recording from the webinar can be found here
Blogpost written with support of Annachiara Torciano, Prime Weber Shandwick
Boards Impact Forums next open Webinar is scheduled for October 29 at 2.30-9.30 CET on the topic of Boards as Drivers of Corporate Renewal and Sustainability. Listen to both research results and highly experienced board members. Professor KTH & Luiss, Board Member Mats Magnusson and Professor Emeritus and founding father of INSEAD Directors Program and NED Ludo van der Heyden will share the findings and insights emanating from research on Governance of Corporate Renewal, Innovation and Sustainability. A following panel will discuss the topic including Board Directors Luisa Delgado, NED at e.g. IKEA/ IngKa, Fortum, Telia, AO World, Vice Chair Barclays Bank Suisse, Chair of Schleich, with a background as both CEO and HR director at companies as Safilo, SAP and Proctor and Gamble, and Asthildur Otharsdottir, Partner Frumtak Ventures, Chair Kaptio, Controlant, Board Member University of Iceland, with long board experience from Marel and Icelandicair Group. The panel will be moderated by Liselottte Engstam, Chair Boards Impact Forum.