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Dec 10, 2015

Ceres report recommends boards focus on sustainability

Recommendations to boards also call for greater diversity and ties between pay and sustainability

Boards of directors should focus on sustainability issues that significantly affect revenue, promote board diversity and establish stronger ties between executive compensation and sustainability to prepare for the ‘extraordinary challenges of global climate change, water scarcity and workplace inequality’, according to a report by lobby group Ceres.

In a series of recommendations based on interviews with directors, governance experts and senior corporate leaders, Ceres also suggests boards embed sustainability in committee charters, involve key staff responsible for profit in board-level sustainability discussions and integrate sustainability into risk oversight.

‘More than executives and other employees, members of corporate boards are responsible for ensuring long-term shareholder success and overall value creation,’ the report authors write. ‘Yet, while there has been a measurable uptick in director engagement on sustainability issues, it is still largely the exception rather than the rule at most companies.’

The 31-page report cites an earlier Ceres study showing that only 32 percent of 600 of the largest publicly traded companies in the US oversee sustainability at the board level, adding that ‘it is often unclear whether board sustainability oversight is achieving meaningful performance improvements.’

Attention to issues such as climate change, pollution, diversity, workers’ right and other governance-related topics has been intensifying recently with the November-December 2015 United Nations conference on climate change (COP21).

Earlier this week, ShareAction, a UK-based lobby group that promotes responsible investment, organized 20 investors with a combined $530 bn in assets under management to call on companies to switch to 100 percent renewable power.  

ShareAction is asking the world’s largest firms to join RE100, a renewable energy initiative from international environmental body the Climate Group that commits companies to switching to renewable energy by an agreed-upon date, with Google and BMW Group joining the initiative last week.

‘We’re already seeing companies joining RE100 and committing to 100 percent renewable power at a remarkable rate, but if we’re going to tip the balance of the energy market in favor of renewables once and for all we need all world-leading businesses with us,’ says Emily Farnworth, campaign director for RE100, in a press release.