Empowering sustainable business
Digital transformation and leadership in the context of sustainability
Despite the ESG backlash in the US, the goal of companies must be effective, entrepreneurial and prudent corporate governance that ensures the long-term success of the company. Companies must benefit all their stakeholders, including shareholders, employees, customers and the communities in which they operate.
Purpose should be key in Corporate Governance. The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the company.
1. Sustainability and digital transformation
- Truly embed digital transformation and sustainability in the corporate strategy
- Create an environment for innovation that contributes to sustainable growth. Make a contribution through IT and AI
The future of corporate governance is defined by digital disruption and sustainability, values, purpose and leadership (ESG)
1. Digital disruption is changing corporate governance accountability
The new digital world is shaking up the leadership of organizations: Data is a critical infrastructure. Organizational resilience takes precedence. The benefits of board accountability and openness are key. The board competence has to change in the digital domain. Digital and data are not just a matter for the risk register.
2. Stakeholder capitalism is increasingly important
Social media and the power shift in society. The power of consumers and employees is increasing. Fake news and hate speech are growing. The power, data protection and ethics are important for success. AI creates bias in the society.
3. New board matters are needed
Data protection and enterprise risk are new board matters. It’s key to address information security and data protection issues with the Board of Directors. A Data Protection and Information Supervision Committee is needed to be created. The responsibility of the Compliance Monitoring Committee should be ensured. The responsibility of individual directors for data protection and information security is increasing.
2. Empowered leadership
- Change leadership in the digital transformation
- Shape sustainable change and growth in the context of sustainability
1. Align corporate management with sustainability and purpose. Develop corporate values and purpose to create added value
The society demands that companies serve a social purpose. To be successful in the long term, every company must show how it makes a positive contribution to society. Companies must benefit all their stakeholders: shareholders, employees, customers and communities. Boards with a diverse mix of genders, etc. have more diverse and conscious mindsets. They are better able to recognize opportunities that promote long-term growth.
2. Create corporate purpose for millennials
Employees will have a greater say in determining the company’s purpose for doing business. In a 2019 survey conducted by Deloitte, millennials were asked what the main purpose of companies should be — 63 percent of them said “to improve society” rather than “to make a profit”. In the coming years, millennials will also influence as investors as the world experiences the largest wealth transfer in history. As wealth shifts from and investment preferences change, environmental, social and governance issues will become increasingly important for business valuation.
3. Purpose and people are an inextricable link
Clearly, connecting with stakeholders — building trust with them and acting with purpose — enables companies to understand and respond to changes in the world. Companies that do not earn this trust will find it increasingly difficult to attract customers and talent, especially as young people increasingly expect companies to reflect their values. The more your company can demonstrate that it adds value to its customers, its employees and its communities, the better you will be able to compete and deliver long-term, sustainable profits for shareholders. Investors expect companies in all countries to pursue talent strategies that enable them to utilize the widest possible range of talent. Investors require long-term plans to improve diversity, equality and inclusion to be fully disclosed in sustainability reports.
4. From purpose to prosperity, set values, vision, the value for society and shareholder value for the common good
Investors talk to companies about purpose and how it aligns with culture and corporate strategy. We have no intention of telling companies what their purpose should be — that is the job of the management team and the board. Investors seek to understand how a company’s purpose influences its strategy and culture to support a sustainable economy.
Actionable advice
The future of corporate governance is defined by digital disruption and sustainability, values and purpose and leadership (ESG). The digital disruption is changing corporate governance accountability. New board matters are necessary. Corporate purpose is to create value, set values and culture (“tone from the top”), vision, mission and strategy, the value for society as well as shareholder value for the common good.
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