More often than not striving for short term gains drive the corporate agendas as opposed to creating long term sustainable gains, according to a top management body.
The Chartered Institute of Management Accountants (CIMA) Technical Symposium on ‘Reshape your business’ addressed this issue with many presentations by eminent personalities on Thursday.
Gillian Lees, Thought Leadership Specialist, Profile and Communications CIMA noted that the Walker review of governance in the banking industry in the UK – which is also being keenly examined across the world – places considerable emphasis on the board’s role in strategy and risk.
“For example, Walker points out that when the board is discussing major strategic and risk issues, it is essential that there is a disciplined process of challenge, recommending that ‘board-level engagement in the high-level risk process should be materially increased’ with particular focus on the entity’s risk appetite and tolerance. Another related area is stress testing – boards are urged to ensure that they ‘understand the circumstances under which the entity would fail and be satisfied with the level of risk mitigation that is built in’. While the Walker Review is aimed at the banking sector, these specific recommendations are good advice for any organization,” she said, presenting the keynote address on Enterprise Governance - Restoring boardroom leadership.
She added that this emphasises the need for organizations to balance both conformance and performance issues. “So while compliance with legislation and standards is crucial, organizations must never lose sight of the need to ensure long-term sustainable success through effective performance.”
She noted that the recent turbulent events have put boards under even greater scrutiny. “They are going to have to improve their governance practice significantly by demonstrating consistently strong leadership and high ethical standards,” she said. The board effectiveness wheel provides a useful starting point from which any board can assess areas where they need to improve.
Ravi Fernando, CEO Sri Lanka Institute of Nanotechnology noted that business is increasingly ‘differentiating’ on either environmental sustainability where its innovation is focused on the emerging green business opportunity, or social sustainability where it could impact the organisation’s employee, community and society in a manner that sets it apart.
He said that social sustainability is also proving its worth in a global market place where Asia led by China and India is increasingly being perceived as the ‘world’s factory’ where much human right violations and exploitation of labour including child labour (61% of the 230 million children in labour are in Asia – ILO report 2008) is taking place.
“This coupled with emerging ethical consumerism immediately provides business with the opportunity to differentiate itself from the rest as being committed to social sustainability,” he said.
He noted that the 21st century will have only two types of business - Business where enlightened boards have understood the new paradigm and therefore embedded stakeholder/triple bottom line mindsets in the business through strategic corporate sustainability, and businesses where boards continue to focus corporate and enterprise governance on the old paradigm of shareholder value creation.