Sustainability ‘critical to rebuilding public trust in business’
Corporate sustainability must be placed at the heart of the Government’s proposed reform of corporate governance if it is likely to succeed, says IEMA, the worldwide alliance of environment and sustainability professionals.
It says the reforms must ensure boards look beyond short-term financial performance to also include environmental, social and wider economic factors if plans are to successfully restore public faith and trust in privately and shareholder-owned organisations.
Responding to the Government’s Green Paper consultation, which closed on 17 February, Martin Baxter, IEMA’s Chief Policy Advisor, said:
“Companies have a critical role to play in enhancing economic and social value in a way that is low carbon, resource efficient, enhances natural capital and respects human rights. Current corporate governance practice places undue emphasis on short-term financial performance, to the detriment of long-term decision making in companies.
“Greater accountability to society is needed through enhanced corporate transparency and directors’ accountability. This approach needs to be more clearly embedded throughout Government’s reform of corporate governance. It must also be reflected in the way that Boards engage with employees and stakeholders, in executive pay awards, and in the way that companies report.”
IEMA’s response to the Government’s Green Paper on Corporate Governance Reform concentrated on issues including strengthening the voice of employees, customers and wider stakeholders; executive pay; and corporate governance in large privately-held businesses.
“We do not believe that effective corporate governance should be differentiated on the basis of company ownership structure,” said Baxter. “If there is a genuine desire from Government to improve trust in companies, then underpinning transparency and accountability safeguards need to apply equally to public and private companies. This means extending non-financial reporting requirements, including mandatory carbon reporting, to all large companies”.
A full copy of IEMA’s response to the Government’s consultation is available at www.iema.net/corporate-governance.