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Exploring the Link Between Corporate Governance and Sustainability

Exploring the Link Between Corporate Governance and Sustainability

by Dustin Abad on and last update on May 25, 2020

Governance is an essential consideration in multiple areas, from business to everyday life situations. When leveraged correctly, corporate governance instills confidence in the public, who can be confident leaders are doing their job correctly and acting in the best interests of an array of stakeholders.

Many modern legislative processes exist to protect and to prevent a recurrence of issues which can negatively impact societies. In today’s modern business environments, companies must be socially responsible in order for customers to feel comfortable with and trust organizations sufficiently to engage in business.

Socially responsible initiatives have come to the forefront, in an age where companies have more accountability to stakeholders than they ever have before. Corporate governance practices are improving with time, as relationships between corporations and stakeholders strengthen.

 

With an enhanced focus on corporate governance, organizations are more accountable to stakeholders, considering the wider impact of actions as opposed to focusing solely on profit. Building an ethically reputable business can have a profound impact on sustainability, where socially responsible organizations are much more likely to thrive and stand the test of time.

 

Increasing Interest in Sustainability

As corporations begin to recognize the impact of their behavior on surrounding environments, companies are more interested in sustainability than ever before. This is crucial for longevity, with a view to sustaining business operations into the future.

Innovation is a great way to keep up with modern consumer demands, to ensure a socially responsible approach which aligns with the emergence of new technology. It’s crucial for organizations to highlight evidence of their impact on the present and future.

 

Sustainability is often incorporated into strategic planning, looking at four major aspects which are equally important:

Environmental Impact

An organization’s impact on the environment, including water, waste, energy waste and paper waste. Never has protecting the environment been more important, where bolstering a green image can improve your bottom line if you’re seen as socially responsible.

Societal Influence

A look into how society impacts corporations, especially the influence that members within society have on stakeholders.

Organizational Culture

This addresses the relationship between individual members of an organization and its departments. Modern businesses look to establish positive, progressive cultures with interactivity between executives, management, internal stakeholders and employees.

Finance

The impact of a corporation’s financial return, with reference to the inherent risk of business decisions. Organizations must consider the risk level and potential for risk at any given moment, with a focus on consumer impact.

These four components consider everyone and everything it is to be a stakeholder in your company’s business.

 

What are the Benefits of Sustainability for Corporations?

As a race, humankind has become increasingly aware of our collective impact on the environment. Green initiatives are gaining traction, where we’re more focused on preserving our earth’s natural resources to protect our future.

Companies are commonly perceived to consume an ungodly amount of natural resources, something which is still true to this day. However being as ‘green’ as possible without compromising business operations is a growing initiative, one which awards companies a positive social image.

It helps when companies incorporate conservation principles at the core of mission, culture and strategic planning. A modern business culture is one that encourages stakeholders and employees to cut costs, reserve energy, reduce waste and enhance other environmental factors.

The collective impact of environmentally friendly practices positively influences conservation efforts. Making a concerted effort goes a long way to appeasing stakeholders, whose interests must be met to maintain a productive working environment.

Businesses must meet criteria like lower emissions, going paperless and other conservation efforts. Stakeholders appreciate efforts like incorporating recycling bins throughout facilities, one of many conservation efforts arising as part of strategic procedures.

There are many obvious benefits of reducing waste, energy and costs. With a conservationist perspective, companies can embrace new opportunities to promote innovative solutions for saving energy. By saving energy, companies can retain funds to invest in other business opportunities, for example expanding in new markets.

Companies can even differentiate from the competition with a green focus, while getting ahead of future regulatory issues. Conservation efforts can attract like-minded people. One of the biggest influences of all is how public perceptions change, which can directly impact a company’s bottom line.

Making changes at the core of business operations requires a revisit of corporate governance policies. These can be altered to increase corporate credibility and secure a competitive advantage.

 

Corporate Governance and Sustainability

Boards and senior management rely on corporate governance for responsible company management, with a view to sound ethics and accountability.

Corporate governance principles include accountability, responsibility, transparency and fairness. By factoring these four key focuses into all aspects of business operations, you can work toward establishing corporate social responsibility.

Corporate governance and social responsibility are intrinsically linked, both helping organizations retain a healthy business balance. It also aids a company’s efforts to develop control mechanisms, promote satisfaction, appease stakeholders and shareholders and ultimately increase shareholder value.

The relationship between corporate governance and sustainability is a profound one, which must be acknowledged and secured if organizations are to survive in a competitive business world.

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