2Sustain

Without question, the disaster that’s unfolding in the Gulf of Mexico is a case study in the lack of corporate sustainability oversight.

But, now there’s a new report that says the problems aren’t limited to BP or even “big oil.” According to this latest research, most corporations don’t seek out independent sources of information on the impact of business operations on the environment, and most lack detailed procedures and metrics for integrating social objectives into daily corporate activities.

The report, Sustainability in the Boardroom, released yesterday by The Conference Board, reveals that few companies consistently elevate sustainability issues to the strategic discussions that take place at the board level. As a result, the vast majority of directors (89 percent) continue to base their decision on reports by senior executives, and most sustainability discussions with the board only take place in reaction to emergency situations.

Here are a few additional, and equally sobering, findings from the report:

• 62 percent of the companies surveyed do not use any metrics to link executive pay and accomplishments in the social or environmental sphere. That’s not surprising, considering that the report also found that most companies lack the basic components of a fundamental sustainability program, such as a dedicated functional department, and a system to assess whether sustainability activities help financial performance.

• More than three-fourths (77 percent) of those surveyed do not employ any of the widely endorsed standards existing today in many areas of social and environmental concern. That means reporting is not always meaningful, nor transparent. For instance, 43 percent said their companies do not include any information on metrics in their disclosure.

• 57 percent of the companies surveyed report having received an explicit request from an activist investor.  According to the report, rising activism like this –in combination with evolving regulatory developments –are creating greater awareness about sustainability issues among corporate boards.

Although this research is based on a relatively small sample of 50 U.S. companies, the results certainly make it clear that we have far to go regarding acceptance of corporate social responsibility and environmental stewardship as fundamental to overall business performance.  Will the BP oil disaster change the mindset of your board?

“The environmental catastrophe that has been unfolding in the last few weeks in the Gulf of Mexico is indicative of how closely intertwined sustainability and corporate strategy really are,” says Matteo Tonello, director of corporate governance research at The Conference Board Governance Center and author of the report.  “However, more directors are realizing the critical influence of stakeholder relations on firm performance and feeling pressure from regulatory bodies, enforcement agencies, and activist investors.”