In combination, the concepts of sustainability and governance are incredible and potentially world changing. Let’s take a fresh look at each of them before delving into the concept of sustainability governance itself.
What is Sustainability?
To sustain something means to keep it up. If something can’t be done over a certain timescale, it’s not sustainable over that timescale. If one goes into a garage, shuts the doors and windows and starts the engine of a car with an internal combustion engine, it will be sustainable for maybe a few minutes, but not too far beyond that. In comparison, the combustion of fossil fuels in our atmosphere will not be felt in a short space of time, but instead over decades. Different actions have different timescales over which sustainability must be measured.
When it comes to development, the UN report: Our Common Future, defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs."
Sustainability puts the timescale beyond a current generation and means that, when developing, at the very least we need to consider whether the development will have a negative impact on our children, and their children. I think this is true for other activities apart from development too.
Elon Musk, the CEO of Tesla, talks about “accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good. That's what "sustainable" means.”
So there is this temporal component to sustainability. But there is also a spatial component. When I read Musk’s quote “life’s still good” I think, “hang on, for many many millions of people around the world life is not good.” I think of extreme poverty, and gross inequality and many other ills. Sustainability surely means that these things are on the decline, even if they are not in our backyard. From a societal perspective, they are inherently unsustainable. They cannot persist. Justice dictates that they cannot. That’s why sustainability and justice are flip sides of the same coin. Injustice cannot endure. The slave trade was unsustainable. So was apartheid. You cannot sustain something that is inherently wrong.
According to this thinking, we must maintain the parts of the status quo that are sustainable while improving those parts that are not sustainable. And sustainability is all about the different things that humans do. You cannot merely have sustainability. It has to to be in reference to something else:
Sustainable water use. Sustainable food production. Sustainable manufacturing. And so on....
Think about each of these. For example sustainable water use means there will always be potable water to drink, cook with, clean with, use to manufacture stuff, as to use for many other activities. Always.
Sustainable recycling… Sustainable transport… Go on. Give some colour to what sustainability looks like for each of these.
What is Governance?
The World Bank defines “governance” as the manner in which power is exercised in the management of a country's economic and social resources for development.
That’s a useful definition if you think about governments of countries governing. But it’s not only governments that govern. Companies are also governed, as are many other organisations in society. Here’s a definition of corporate governance that is a bit dry, but is packed with meaning:
“Corporate governance “consists of the set of processes, customs, policies, laws and institutions affecting the way people direct, administer or control a corporation. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the corporate goals.”
So governance has to do with how corporate actions carried out by representatives of companies are guided, limited and directed. The powers that permit these actions often have some kind of ‘without limits to power’ granted to those who carry out those actions. These limits to power can be either signed up for voluntarily, like contracts or internal policies and procedures or imposed externally, like the law.
This is an oversimplification, but in companies, managers can bind the company to commercial deals if the board of directors gave them authority to do so, and the board of directors is subject to the law, and to the shareholders that put them there. And in democracies, presidents exercise powers, but only if the exercise of power is within the limits imposed by law. Presidents are further subject to the electorate who can choose not to re-elect them.
In addition to the limits of power imposed by law, there is another component of governance that I have alluded to but not stated. It is choice or discretion. Actions for organisations must be done lawfully and they should also be done wisely. For example, just because it is lawful to burn fossil fuels in the finite atmosphere, it does not mean that it is sustainable and should be done.
The meaning of Sustainability Governance for businesses
And this is the segue into answering the question, what is sustainability governance?
Sustainability governance is governance of organisations which is both lawful and which promotes a good life for all, now and far into the future.
There are laws that promote sustainability, laws that are neutral and laws that permit unsustainable behaviour and governance. We’ve previously written that knowing the laws which promote sustainability is the starting point of sustainability governance. Because regulation is so incredibly disorganised, any sustainability governance initiative needs to have at its core, a way to know and be updated of what the law requires of the organisation which one is governing.
Beyond that, one needs to know what actions are wise, just and sustainable. Knowing what is sustainable is often difficult and it is inevitable that actions performed in the name of sustainability may prove to be unsustainable in the long run, especially the long, long run. However, being cognisant of a sustainability imperative, especially if you look at it from the perspective of justice in the here and now, will inevitably lead to corporate actions tending towards sustainability. Knowing what actions are wise, just and sustainable will improve as organisations optimise for operations and performance through a sustainability lens, test or framework, both from the perspective of the organisation itself (like, will the company be around for 200 years or more) and the perspective of the planet and society generally. As we account for sustainability, scientific research will determine what works and what does not work; what actions promote sustainability, and which actions do not.
The need for sustainability governance has led to the rise of sustainability management systems as well as the rise of non financial factors being considered in making and managing investments. ESG factors are being increasingly important in investment decisions and are required by companies to account for and report on. A lot of really good pioneering work has been done in relation to ESG accounting and reporting (see the work done by the Global Reporting Initiative, the International Integrated Reporting Council and the Economics of Mutuality). However, accounting for and reporting of ESG factors is not as mature as financial accounting and reporting. In time, it is likely that a universally applicable, generally accepted accounting principles (GAAP) for ESG will be established, which will further promote our ability to govern sustainably.
Imagine a future with sustainability governance
In order for countries and organisations to be governed sustainably, a lot of work still needs to happen. Many organisations are making excellent progress in adopting the emerging principles of sustainability governance introduced here. Although sustainability governance is a work in progress, Libryo gets excited by its potential. I think about cities with air that is just as clean and rivers as unpolluted as those in the mountains. It sounds a bit far fetched perhaps, but true sustainability governance is certainly a model of governance that will enable visions of the future like this to be realised.
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