Image: Christina Morillo
Corporate governance standards and expectations continue to evolve in response to rising demands from investors, regulators and stakeholders — and in response to continuous improvement on the part of high-performing Boards. In recent years, with more companies clarifying their purpose as their meaningful reason to exist, their Boards are beginning to broaden their oversight role to include purpose. This is referred to as “Purpose Governance” — and it is essential to put organizations and society on a sustainable footing.
The purpose governance trend is a welcome one, as Boards that fail to oversee their company’s purpose face a governance gap. They put their companies at risk of inauthentic purpose or “purpose washing;” and worse, fail to realize the commercial and social impact of their purpose.
Some observers, such as Corporate Knights — a Canadian media and research company focused on advancing a sustainable economy — contend that there is a widescale purpose-governance gap. In 2022, it published the world’s first rating of social purpose companies — The Social Purpose Transition Pathway: Helping Companies Move from ‘Say to Do’ — which evaluated 34 Canadian companies and global brands with significant operations in Canada to assess their purpose governance and implementation maturity. The report found that many companies had corporate values that reflected their purpose, many Boards disclosed progress on the purpose through annual reports, and some included purpose in the corporate strategy. However, few Boards in their study included purpose oversight in their Board charters; and they also didn’t assign purpose responsibilities to the CEO through the job description. The report recommended that Boards close this purpose-governance gap.
Read more at Sustainable Brands.