Governance is described as the system for controlling and directing an organisation. It provides the organisation with a moral compass that includes the values, principles, and ethics that it embraces.
This system starts from the very top with leadership, which implies that the integration of sustainability within the operational context of an organisation rests and falls on the governance pillar.
It is the critical pillar on which other sustainability efforts rest and could determine, to a large extent, the success of sustainability goals and ambitions. Knowledge and action are essential for a robust and effective sustainability governance structure.
First, the organisation's leaders must be informed and up-to-date on the changes occurring across their operating environment, including the non-financial issues or sustainability topics that impact their short-, medium- and long-term viability.
This knowledge must be comprehensive to provide leaders with a view of sustainability beyond the compliance burden but extends to the opportunities it provides for future growth and long-term competitiveness.
Secondly, clarity on the specific actions required to implement sustainability across the organisation is vital. It is moving from 'why' sustainability to the 'what' and 'how' for an organisation.
A strong governance pillar provides numerous sustainability benefits to organisations, like instilling the right business conduct within the organisation and its value chain, which lowers the risk of malpractice that could lead to fines and sanctions, and preserving the organisation's licence to operate in society through good conduct.
Closely linked to good business conduct is the reputational benefit of a strong brand image and value, customer loyalty and less negative publicity.
Operationally, a strong governance structure delivers a holistic risk management approach, better integration of ESG across the organisation and appropriate controls over sustainability matters, including targets and reporting.
The outcome of all these is long-term financial stability and growth, improved liquidity and working capital management, reduced credit losses, and a sustained positive financial performance and return for stakeholders.
The governance pillar reflects the quality of leadership and influences significant aspects of the organisation regarding sustainability.
From business conduct, regulatory compliance, operational resilience, reputation, and brand value to financial success, having the right governance team is the first step to getting sustainability moving.
Akinyemi Awodumila is a Partner at Deloitte East Africa. He is an author who writes and speaks widely on corporate reporting topics
