Will the new code crack it?
This week, the Wates Principles were published as new guidance for large private companies, reiterating the need for them to behave in a way that benefits society as well as the economy, building trust and confidence among all stakeholders.
It is an important moment, recognising the impact of the private business sector, and sits alongside the revised UK Corporate Governance Code for listed companies that goes live on 1 January 2019. The two documents are consistent in placing expectation on leadership teams to think long term, and they will have important trickle-down impact on smaller organisations, but will they be the tipping point for companies turning their purpose into sustainability practice?
Finding your purpose as a business has become a call to action in itself. The purpose word is used 10 times in the UK Corporate Governance Code and it is an important starting point for many board directors to articulate the value their business adds beyond profit. But however well-constructed they are, purpose statements and the values that support them are just words on a page without programmes to bring them to life. As statistics from PWC’s report on meeting the challenge of the Sustainable Development Goals show, 72% of companies mention the Goals in their reporting but only 23% disclose key performance indicators and targets that show they are taking action and monitoring performance.
However well-constructed they are, purpose statements and the values that support them are just words on a page without programmes to bring them to life.
If the new corporate governance approaches are not enough, then companies just need to look at the wider operating environment to see why they need to act fast. The win-win of tackling the SDGs has been much discussed since the $12 trillion market opportunity was identified by the Business and Sustainable Development Commission. There is extensive evidence of the benefits to employee productivity, recruitment and retention. And competitive advantages are becoming clear in B2B markets as customers seek to demonstrate sustainability and want proof that their suppliers are not a risk.
While some global organisations are setting ambitious targets, senior leaders in the majority of mid-cap businesses are stalling.
So what’s stopping people? Sustainability issues have reached most board tables but, while some global organisations are setting ambitious targets, senior leaders in the majority of mid-cap businesses are stalling. Recent conversations have highlighted that some are confused about where to start and others afraid of taking action in case it doesn’t work. They are paralysed by a desire for instant perfection and sustainability solutions are getting stuck in complex planning loops.
Leaders need to release themselves from the need for a ‘big gesture’ and recognise the power of starting small. To go back to their innovation roots or, if that’s not their forte, then get others involved from across and beyond their company. Look at what competitors and peers are doing and adapt initiatives to address their issues. Think the impossible and then find partners who can help turn it into reality. Test and learn, inspire and share, start the conversation.
Leaders need to release themselves from the need for a ‘big gesture’ and recognise the power of starting small.
Without evidence of action, the Wates Principles and UK Corporate Governance Code cannot be truly fulfilled. Perhaps this year, as Directors consider their responsibilities alongside the reality of progress against the SDGs, the focus will shift from a reliance that ‘we are’ to looking at actual behaviours and a recognition that ‘we do’. Perhaps the codes can finally crack the barriers to action.