Preface

A growing number of stakeholders, particularly investors are increasingly focusing on the role corporate boards play in providing guidance and oversight over a company’s sustainability strategy and performance.

The funds managed by over 500 signatories of Principles for Responsible Investment (PRI) surpassed 100 trillion USD in 2020. The signatories commit to incorporate environmental, social, and governance (ESG) factors into their investment decisions; to better manage risk and generate sustainable long-term returns.

Kofi Annan’s 1999 Davos speech, where he had stated that the world’s most pressing problems cannot be solved by governments alone and it is time for the civil society, academia, and business to pitch in, has led to the establishment of UN Global Compact the following year.

In 2012 during the Rio+20 meetings, the five founding partner exchanges of the Sustainable Stock Exchanges (SSE) initiative*, made a voluntary public commitment to promote improved ESG disclosure and performance among listed companies in their markets.

Awareness on what is necessary for a sustainable future as well as commitment to action is also on the rise. Sustainable Development Goals (SDGs) were approved by almost 200 countries as a common framework to focus on actions for a sustainable future, in 2015. Since then, a growing number of companies commit to SDGs and prioritize sustainability issues at the CEO and board level.

This increasing awareness of the importance of sustainability is shifting the focus of the corporation from “The business of business is business” to “Doing good is good business” and from “short term profits” to “long term purpose”.

Increasing number of leading corporations are publishing sustainability reports. However, generally the reports do not provide an integrated picture of how the firm conducts its business, but rather provide selective results linking them with areas of public attention, such as the Sustainable Development Goals on an ex-post basis, rather than setting and sharing targets and performance.

A shift in the mentality in how to address the sustainability efforts of the corporations is needed: Focusing on the opportunity to make a difference and embracing responsibility for potential influence over the whole value chain, rather than taking a defensive approach to show that you are doing is good, to defend against negative publicity.

The fact that most corporations who have started to focus on sustainability publish two separate reports, one for the financials and another for sustainability efforts is an indication of how the companies are not fully integrating sustainability issues into their business processes. Integrated reporting is trying to address this issue.

The International Integrated Reporting Council (IIRC), chaired by Mervyn King, was launched in 2010. Integrated Reporting intends to elicit material information from the organizations about their strategy, governance, performance, and prospects in a clear, concise, and comparable format.

Integrated reporting refers to representation of the financial and non-financial performance of a company in a single report. This helps in providing a greater context to the non-financial data such as how the company performs on environmental, social, and governance (ESG) parameters, how sustainability is embedded in the core business strategy and processes.

Since 1991, the EFQM Model became the most commonly utilized framework to make the process of landing effective change in the organizations. The EFQM Model was renewed in 2020. Built on design thinking, the new 2020 Model has shifted from being a simple assessment tool to one that offers a vital framework and methodology to help with the changes, transformation, and disruption that individuals and organizations face every day. As such it advocates a ‘leaders at every level’ approach to ensure strong decision-making, collaboration and teamwork in every team and every project. The Excellence Movement have always focused on getting things done and on the quality and depth of execution. By shifting the focus from the organization to the ecosystem and to purpose, vision, and agile strategies, the EFQM Model 2020 provides a great tool to help deploy the required change in the culture and systems of an organization for integrating sustainability into the way the business is conducted.

All these developments do not only demonstrate that the way we conduct business needs to change in a dramatic way, but also provide the tools to get the job done. Negative and positive externalities should cease to be externalities and become an integrated part of corporate decision making. Focus needs to shift from short-term results to long-term impact. Leadership needs to be about not only managing your own organization but also positively influencing the stakeholders in the ecosystem as well as assuming responsibility to improve the business climate. While there are several CEOs taking the lead in this mentality transformation**, the progress has been slow.

Good governance is the key to the sustainability of sustainability efforts. Therefore, Argüden Governance Academy has developed the Sustainability Governance Scorecard^© to identify how the best companies (Global Sustainability Leaders) govern and conduct their sustainability efforts. This impact research aims to bring insight and information to the attention of decision makers to motivate action and improve effectiveness of implementation. Our approach is intended to be utilized as an improvement tool for better governance of sustainability issues. The SG Scorecard does not aim to measure the companies’ sustainability performance but seeks the presence of an environment and a climate of sustainability governance where sustainability efforts can flourish. The report includes best-practice examples of various sustainability governance steps to accelerate learning from peers.

We hope that the SG Scorecard will help improve the state of the world by speeding up peer learning from the global leaders.

* Borsa Istanbul, B3 S.A. (Brasil, Bolsa, Balcão – São Paulo Stock Exchange), Johannesburg Stock Exchange, Nasdaq, and The Egyptian Exchange.

** Such as Paul Polman, former CEO of Unilever and the current Chairman of the Global Compact Foundation and Indra Nooyi, former CEO of PepsiCo.