New Framework to Accelerate Business Action on ‘G’ in ESG

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Post By: Kathleen Brennan, LRN

Legal, ethics, compliance, sustainability and risk professionals – and executive teams and boards of directors as a byproduct – have a new tool, framework, and source of guidance to accelerate business action on the governance element (”G”) in environmental, social, governance (”ESG”).

Released earlier this month by the United Nations Global Compact, the SDG 16 Business Framework provides companies with comprehensive guidance on strengthening business culture, ethics, and performance and supporting public institutions, laws, and systems.

One of the newest and most ambitious and expansive of the UN Sustainable Development Goals, the SDG 16 Action Platform was launched in 2018 to promote peace and justice and to foster strong, effective, accountable, and inclusive institutions.

The new Framework provides actionable steps for companies seeking to accelerate their progress and work in ESG, corporate purpose, corporate culture, compliance, and Stakeholder Capitalism. Included is the concept of transformational governance, which reframes the traditional definition of governance and comprises three interrelated dimensions:

  1. CONVENTIONAL GOVERNANCE: broadening the traditional notion of corporate governance to include board and management oversight, values and culture, strategies and policies, operations and relationships.
  2. SUSTAINABLE GOVERNANCE: strengthening governance with respect to managing environmental and social risks and opportunities.
  3. GLOBAL GOVERNANCE: inspiring businesses to contribute responsibly to public institutions, laws and systems at the international, national and municipal levels.

Businesses are encouraged to integrate the underlying values and principles of transformational governance to move beyond compliance to become advocates of peace, justice and strong institutions. The framework raises the bar for business to adopt an ethical and values-based approach to culture, governance and leadership, resulting in greater shared value for the business, employees, investors, consumers, and communities.

SDG 16 includes 12 specific targets that promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions. The targets include guidance on topics like fighting organized crime, bribery and corruption, and child labor and promoting transparency, ethical leadership and responsive and inclusive representation in decision making.

Businesses are encouraged to become more accountable, ethical, inclusive and transparent by embracing the following in their internal and external activities, including throughout their supply chains:

The Framework is not a new legal concept but a principled-based philosophy. While it lacks legal requirements or oversight from regulators, it is consistent with the kind of guidance provided by the UN Global Compact intended to help companies become more systematic, effective, and innovative in becoming more principled in their operations. The UN Global Compact is a purely voluntary initiative that works with companies to align their operations and strategies with ten universal principles in the areas of human rights, labor, environment and anti-corrption. With more than 10,000 companies and 3,000 non-business signatories based in more that 160 countries, it is the world’s largest corporate sustainability initiative.

The new guidance is both built on international standards for responsible business and emerging best practice on moving beyond compliance-only approaches to embrace a broader conception of what it means to be a good corporate citizen.

At a time where there is increased focus and attention on Stakeholder Capitalism and ESG, it expected to be an important reference for business, particularly those with allegiances to one or more Sustainable Development Goals and commitments to being accountable to all stakeholders.

About the Author: Kathleen Brennan leads thought leadership and manages alliances for LRN, having spent more than 15 years at the intersection of business’ responsibility to society.