How can organizations ensure that sustainability is embedded in various facets for growth?

Listen to Episode 67 on Apple Podcasts

Guest: Frederik Otto, Founder and Business Advisor of the Sustainability Board Report

Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation

In this episode:

  1. Developing passion for sustainability: Otto takes us on a journey as to how he discovered his passion for sustainability.
  2. Where does ESG sit in a company: Otto discusses who should have the responsibility for ESG in an organisation and the skills necessary for such responsibilities.
  3. What should be the focus for future research: Otto discusses the future of research in Sustainability and the necessary questions to ask and address.

Summary:

In this episode of The Corporate Director Podcast, Frederik Otto, Founder and Business advisor of Sustainability Board Report, discusses his passion for sustainability and and takes us inside his latest research into how organizations should define ESG ownership.

Developing A Passion for Sustainability

Otto begins with his professional background: “I started career as an entrepreneur out of college. I didn’t like the idea of a corporate career at that time. I spent my first five years at various ventures, the first of which setting up franchise branches in Germany and then helped set up an organization in Switzerland. Listening to clients about what they want to achieve, I started working on human capital strategy and delivering on those goals.”

Otto continues: “I was asked by my firm to participate in a CSR program, running a program for underprivileged teens in London prepping for their careers in corporate engagement. In later years, I increased my engagement through an educational charity in London working with schools on this. This taught me that CSR should really become the central narrative of the business strategy. Going forward, I centered this in my work with clients. With some organizations, the strategies are driven by employees, and in some, the CEOs have grand plans, but those plans haven’t gone anywhere. In some cases, the investors are pressuring the companies to do better”.

“Societal stakeholders expect change, and responsible remuneration should be the catalyst for that change.”

Frederik Otto, founder, and business advisor of the Sustainability Board Report.

Where does ESG Sit in a Company? 

The Sustainability Board Report is a privately funded not-for-profit project that aim to showcase different dimensions of sustainable business leadership and corporate governance.

Otto gave us a breakdown of a recent research that was done by the Sustainability Board Report: “To understand questions such as who should be responsible for ESG and who should be held accountable to make sure sustainability is incorporated in organizational strategy. We pivoted to look at where ESG lived: on the board, on a board committee. Then, we looked at ESG competence on these committees. How confident and well-versed in ESG issues were the directors on these committees?”

Otto sheds more light on the findings of the report: “Only 17% of directors on sustainability committees actually have ESG competence. The findings suggested that women are twice as likely to have ESG competence compared to men! So, there is the need to hire more women into Boardrooms. For companies that are very large, besides not having a single woman on the board, which we still see, the board also has no ESG or sustainability policy. They have CSR and ESG shiny reports being touted as action, but you still need to make the supervision of ESG part of the organization’s long-term strategy.”

He goes on, “we assessed 500 directors on their ESG competence for the research.  We found that 30% of women on ESG committees have the competence in ESG, this number was 14% for men. We did a special report on family businesses as well. It turns out that ESG competence of directors were twice as good as a non-family-controlled company.

“Family controlled businesses have a long-term mindset and more mindful of the long term.”

Frederik Otto, founder, and business advisor of the Sustainability Board Report.

What Should be the Focus for Future Research?

Otto gives a look into the future as to what the industry should closely examine: “are you an executive or do you have board experience that actively involved sustainability strategy or governance? Are you a board member of a material nonprofit org/foundation/charity or fellowship? Do you have a formal ESG or sustainability accreditation or certification?”

For the sustainability Board Report, Otto said that their research in 2021 will be expanded to include ESG preparedness score to make it more wide-ranging.

Also in this episode…

Otto gives his prediction for the future of governance: “I believe there will be more women in the boardroom. I am very confident we will, and there’s a clear case for why this is necessary. This doesn’t seem to sit well with a lot of directors as it used to be just a fiduciary role. Today, the game has changed and in ten years, this trend will continue. The role and responsibilities in the boardrooms are expanding.”

The hosts of the show Dottie Schindlinger and Meghan Day briefly discuss the recent released PwC annual directors’ survey. The report’s findings suggests that while 64% of directors surveyed indicated that ESG is linked to their company’s strategy, only 25% say their board understands ESG risks very well.

Resources from this episode: