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How to Improve Sustainability Oversight

Raising awareness of sustainability as a board-level issue is a key theme of the Director’s Handbook on Oversight of Corporate Sustainability Activities, co-produced by Ernst & Young with the National Association of Corporate Directors.

The handbook details the state of sustainability governance and offers a how-to-guide for companies to elevate sustainability awareness within their organization and set up proper governance at the board level.

One of the key recommendations in the handbook is that directors grasp the company’s definition of sustainability and how it fits with the company’s strategy and specific situation. Among other recommendations, the handbook suggests that board and management:

  • Align on the sustainability message and the information it chooses to report publicly.
  • Clarify roles for oversight responsibility of sustainability activities, including external reporting.
  • Establish parameters for sustainability reporting to the board.

The handbook says one reason boards should take oversight of corporate sustainability activities is that investors are increasingly paying attention to the topic. In 2014, nearly half of all shareholder proposal submissions were related to environmental and social matters, according to EY’s Center for Board Matters.

Almost one-third of the shareholder proposals were withdrawn after companies agreed to take action — mostly in the form of disclosure — or committed to ongoing discussions about sustainability. In many cases, simply engaging the shareholders in a dialogue is a viable response.

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