This is the second blog of our COVID-19 sustainable recovery series. Read our first blog 4 steps to a sustainable recovery from COVID-19 to find out what our CEO, Olivier Boutellis-Taft, envisages a sustainable recovery to look like.
Is corporate
governance just a set of rules that we must reluctantly follow? Some
seem to think so, focussing only on the burden and cost. They fail to
see the added value of having proper governance in place.
I see corporate
governance as the foundation for company purpose, strategy, opportunity
and risk management. It enhances the quality of leadership and
decision-making. The cogito publication 10 ideas to make corporate governance a driver of a sustainable economy has more on the central role corporate governance can play in redefining how businesses are run.
Corporate governance
becomes even more important in the current context of environmental
crisis, global pandemic, looming recession and social unrest. It helps
us identify and respond to the right risks. We need to realise we are
quite bad at risk management. We were totally unprepared for the
pandemic, even though scientists and the World Economic Forum had been
warning us.
We need to use the
lessons that the COVID-19 pandemic has taught us and start looking at
the right risks, meaning: climate, biodiversity loss, natural disasters
and human-made environmental disasters.
The COVID-19 lockdowns
made CO2 emissions drop by a historical 6%. But this has appeared to be
only temporary. And we would need to keep up this decrease every year
for the next ten years to maintain a liveable planet. This reduction did
not result from structural change and we seem to be striving to go back
to business as usual.
So, what does this
mean for corporate governance? We need to change our priorities and
start by identifying the right risks. There is no point arguing over
shareholder versus stakeholder value while we continue to destroy the
conditions for life on earth.
This crisis shows once
again that it is time to transform the way we do business. Therefore,
the priority for Boards is to review the business model and think in new
ways about risk management and resilience. This requires a lot of
diverse and lateral thinking and boards will benefit from engaging with
unlikely bed-fellows from climate scientists to socio-psychologists and
biostatisticians .
If boards take on the
responsibility to fully leverage corporate governance to manage the
biggest risks and transform their company’s business model, there is
hope for us to survive and reduce the damage to our planet. From my
side, this is the best lesson that we can all learn from the COVID-19
crisis.