ESG (Environmental, Social and Governance) means different things to different people and different types of organisation. With its origins based on how an organisation assesses/manages the risks and opportunities created by external shifts in environmental, economic, and social systems, it is evolving into principles/approaches/frameworks that analyse how sustainably an organisation is operating. It includes key elements around environmental and social impact, as well as how transparent and accountable governance structures are.
At Advance HE, we know that most institutions are actively considering and evolving what they do to have the most impact and create the most value, including with respect to sustainability. Many institutions have adopted UN SDGs (Sustainable Development Goals), made carbon reduction commitments and have strong education for sustainable development (ESD) ambitions. As the institution juggles its commitment to its own sustainability agenda and the education of the next generation, how does the Board get a holistic view of the outcomes and impact? Codes of Governance vary in their requirements, by way of example:
- The CUC (Committee of University Chairs) Code of Governance covers the need for the governing body to steward a sustainable institution, with two specific objectives:
- determine, drive and deliver the institution’s mission and success in a sustainable way (financial, social and environmental)
- ensure student outcomes reflect good social, economic and environmental value
- The King Code of Governance has ethics at its heart – offering an integrated approach to corporate governance, encompassing the economic, social, and environmental spheres, and is based on the Gro Harlem Bruntland philosophy that “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”
- The AoC code, currently has one its 10 key principles as “the Board should consider its approach to, and have oversight of, its corporate social responsibility”, although this is due to be updated in 2023.
So, if organisations better understand the relationship over time between the resources they use to create value and the impact on the environment, on people and infrastructure, this could help them to better evaluate opportunity and risk. Sometimes that impact is very long term – so how can we be sure that we are making the most ethical and robust decisions at the time?
Looking at ‘what’ institutions do, alongside ‘how’ they do it enables us to reflect on how decisions are made and the basis for those decisions, to better understand our impact on society and the environment using principles which are transparent, holistic and accountable – principles which are fast evolving outside of HE.
A provocation from Paul Sahota about the Boards role in ESG prompts us to think about:
- how well the language and concepts resonate with governing bodies in the sector and how both governors and senior executives can become more comfortable and confident with them
- unique narratives around impact
- the principles for the design of meaningful KPIs and assurance of what is being achieved thereafter. Simon Meacher Head of Executive and Governance at Newcastle University questions the balance of information to the Board and whether ‘universities are guilty of what Professor Adams described as 'rainbow-washing' when they talk about their progress on the UN Sustainable Development Goals? What about the SDGs where they do not perform so well?
- the tensions between sustainability and key strategic aims such as growth, knowledge exchange, civic mission, widening participation, research and teaching
- The varying degrees to which boards understand key stakeholders informing social issues such as staff and student wellbeing, and also the transparency and accountability about our institutional role in communities.
From a sector-wide perspective, it raises a question about whether the sector should sit and wait for change to be a requirement or to embrace such thinking without a mandate from e.g., the regulator. There is an appetite for finding better ways to demonstrate and articulate the value and credibility of HE, but without a mandate to introduce levels of transparency, accountability and reporting there is the risk for limited progress.
With respect to ESG, some useful questions that governing bodies might ask themselves are:
- What are the benefits of setting an ESG strategy and should it be considered an act of good governance?
- What is the role and responsibility of the governing body in both formulating the ESG strategy or approach and assuring it thereafter?
A provocation from Professor Carol Adams considered the Board’s role in sustainability oversight and prompted us to think about how the Board can maintain a holistic view. As previously mentioned, we have evidence to suggest that universities are doing a lot, but is there potential to have more impact if this endeavour were strategically joined up? Key issues which were discussed at the event include:
- Whether the SDGs are being used as a communication tool as opposed to a transformation tool and how much effort is being invested in designing and understanding qualitative and difficult to measure aspects of sustainability in its widest sense?
- What is our story about impact?
- How the Board gets the assurance it needs about progress over time, and has the ability to celebrate what is going well and understands the options to remedying what isn’t.
- How can they ‘lean into the complexity’, without being overwhelmed.
- Is there a role for internal and/or external auditors and if so, what is it?
There is a nervousness that HE is both extremely diverse in itself and different from other sectors, which may be true, but we shouldn’t underestimate that getting this right is a challenge in many sectors. It is worth considering how this mind-set might drive perceptions about the sector’s ability to adopt new/innovative/different practices from beyond HE, for example, internationally recognised frameworks such as the GRI (Global Reporting Initiative) or integrated thinking and reporting. From the perspective of the role of the Board, similar responsibilities and accountabilities apply regardless of size, shape, scope or sector.
With respect to sustainability oversight, governing bodies could usefully ask themselves a couple of key questions:
- How does the organisation best inform and report to the Board about performance across the sustainability agenda?
- How should we measure success and how do we articulate sustainability impact in a holistic way?
Advance HE is currently running a related project – Measuring What Matters, which aims to progress some of the thinking from this event; and some related work from 2018 to 2020 on the topic of Integrated Thinking and Reporting.
Paul Sahota is Head of ESG Europe for DNV Business Assurance Services and a member of the Board at the University of West London he is uniquely positioned to reflect on if and how Higher Education adopts ESG practices for the future. Paul previously served in independent governance roles in the NHS and Charities sectors He is a Certified ESG Analyst His professional memberships include Fellow of the Institute of Corporate Responsibility & Sustainability, and he is a Chartered Financial Analyst.
Professor Carol Adams is Professor of Accounting at Durham University Business School and Editor-in-Chief of the Sustainability Accounting, Management and Policy Journal. She is one of the world’s most published and cited researchers in the field of sustainability accounting and reporting. Carol's work focusses on changes in organisational systems, processes, and beliefs in adapting to sustainable development challenges and the role that reporting Standards and guidance have in helping or hindering that change. Carol is currently Chair of GRI’s Global Sustainability Standards Board, GRI is the Global Reporting Initiative. She is also a member of the Project Advisory Panel on Sustainability Reporting to the Australian Accounting Standards Board and the Technical Advisory Group for the Australian Sustainable Finance Initiative Taxonomy Project. She is author of The Sustainable Development Goals, integrated thinking and the integrated report and the SDGD Recommendations. She is also author of the Advance HE Let’s Talk Value report published in 2018 LINK.
Kim Ansell, is Senior Consultant Governance and Leadership at Advance HE; an MBA graduate, Kim combines strategic insight with a sound understanding of operational excellence. She has worked across higher and professional education providing support to both senior leadership teams and Boards, to facilitate strategic planning and performance improvement. Kim’s work at Advance HE focusses predominantly on reviewing and helping shape organisations’ future direction, stakeholder engagement, and embedding new practices. Kim is a co-opted governor at the University of West London, Workforce Committee.
Join us at ‘Governance Conference 2023: Governance Culture: Navigating policy, politics and people’, 23 November 2023, De Vere Grand Connaught Rooms in London.
This year, Advance HE is celebrating 20 years leading and supporting effective governance in HE. Culture is the key factor that underpins effectiveness no matter what the operating context throws at higher education providers. With that in mind, the 2023 conference will look at board culture through the lens of navigating policy, politics and people. We will reflect on what the past twenty years has sharpened our focus on, as well as look ahead to the prospect of further governmental and regulatory change in order to stimulate thinking on how healthy board culture can thrive to benefit all.