🪴 Maixnor WU

Sustainability Governance

Nov 04, 20253 min read

Governance Structure

Legislation

NFRD or NaDiVeG

  • responsibility for reporting and supervision
    • supervisory board needs to check if the published report looks okay
  • after supervisory board approves it is included in annual report

CSRD

  • new reporting requirement
    • expertise and skills, roles, incentive schemes of management and supervisory board need to be disclosed
  • responsibility for supervision
    • tasks of the audit committee (i.e. subset of supervisory board to check on the sustainability report)

Management Level

Types

  • financial-centered sustainability department reporting to CFO
  • operation-centered sustainability department reporting to COO
  • chief sustainability officer CSO operating across departments
    • best results in terms of international studies
  • different sub-departments or people regarding sustainability in each department

Supervisory Level

  • checking content of the sustainabiltiy report
  • 3-20 members dependent on size of company
    • works typically in committees (renumeration, nomiation, audit, …)

Types

  • just audit committee (smaller companies)
  • audit committee + sustainability expert
  • extra sustainability committee (large enterprises)

Organizational Embeddedness

  • general sustainability reporting lies with CEO
    • finance department may do the data analysis and the “sustainability accounting”, but actually implementing and improving their sustainability lies with other people

Empirical Evidence

Incentive Schemes

  • applicable renumeration for management level
    • creates incentive for board members to care about sustainability

Empirical Evidence

wontfix sr 6 20

# Sustainability Strategy

Ambition Levels

  • purpose-driven:
    • going above and beyond
    • (hopefully) positive stakeholder reaction
  • opportunities-driven:
  • risk-driven:
    • risk of public/shareholder pressure
    • risk of effects of climate change and environmental damage
  • compliance-driven:
    • rather comply than face sanctions

Strategy

Stakeholder Engagement

Employee Engagement

  • define KPIs
    • energy efficiency in operations
    • percentage of renewable energy
    • percentage of EVs in fleet
  • define actions
    • examples:
      • joining SBTi
      • reduction of leakage in operations
      • purchase of renewable energy
      • installment of PVs
      • purchase of EVs
  • monitoring
    • establish internal systems to regularly monitor progress and achievements
    • adjust the strategy as needed to respond to changing conditions

Define Targets

  • key characteristics
  • public commitment
    • transparency, reputation
  • inputs for target setting
    • benchmarking with competitors
    • regulatory targets
    • stakeholder expectations
  • process of target setting
    • how to change current performance

Define Actions

  • employee engagement
  • technology and innovation
    • new technologies, artificial intelligence maybe?
  • cross-functional collaboration
    • alignment across departments
    • integrated solutions
  • evaluation of actions
    • criteria for effective measures
    • confidence level, strategic relevance, time-horizon, reputation (greenwashing), etc

Data Management and KPIs

The Issue

You can’t manage what you aren’t measuring

  • data aspect is very bad in most companies
    • most use spreadsheets
    • mostly about missing standardization efforts
  • not included in forecasting and budgeting either
  • if data was measured efficiently one could imagine a “race to the top” to optimize for emissions, etc

Data Pyramid

  • first … most important but fewest data points, last … inverse
  • KPIs
  • Datapoints require external assurance
  • Datapoints require external reporting
  • Potential sustainability-related datapoints

Empirical Evidence

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