Taking sustainability to the board level

Lundquist CSR Online AwardsWhat do investors think about sustainability issues? Do these issues influence their investment decisions? The need to mitigate risks, enhance long-term performance and attract younger investors is increasingly pushing investors to consider sustainability issues in their investment decisions.

 

With this in mind, how are companies and legislation responding to this changing scenario? At the beginning of this year we discussed the increased importance of ESG (Environment, Social, Governance) issues for investors and how this leads to increased internal collaboration between the legal affairs, investor relations, corporate communications and sustainability teams. EU legislation is now also pushing companies to address non-financial issues. By December 2016, EU Member States should transpose the rules on non-financial reporting into national legislation (Directive 2014/95/EU).

 

In addition to this, last year the Italian Stock Exchange released an updated Code of Conduct for listed companies urging companies to integrate sustainability at the board level. For the largest companies by market cap, the Code recommends either creating a sustainability committee or including responsibilities concerning sustainability and stakeholder engagement in other committees.

 

How are companies responding?

 

In our recently carried out CSR Online Awards study, we look at how companies tackle sustainability beyond reporting on their digital channels as an effective way of reaching investors and consumers. One of the factors we investigate is how sustainability is integrated in the decision-making process.

 

Our findings reveal that only one out of three of the Italian companies considered* explains how CSR principles are incorporated in their governance system and decision-making process and just 40% describe where CSR functions are placed within the company organization. It is extremely important to show how the CSR team is connected to the decision making process. Although the new Code of Conduct recommends addressing sustainability at the board level, only a handful of the largest Italian companies explain whether they do so in the sustainability section of their corporate website.

 

By comparing the Italian results to the German ones, the best performers in our study and also recognized leaders in term of sustainability in Europe, we found that there is ample room for improvement. Close to two out of three companies in Germany* explain how CSR principles are incorporated in the decision-making process on their corporate website.

 

In the example below the German chemical company Bayer presents how sustainability is integrated into the business strategy in the sustainability section of its website.

 

Bayer sustainability strategy

For Bayer it is key to present how their sustainability strategy is integrated into their business strategy. They support this by showing how it is integrated at the board level.

 

 

* 42 large Italian and 28 large German companies were included in the study


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