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In a fast-changing world, board members are facing a complex set of legal, environmental, social, political and economic challenges. How should leaders respond? How much forecasting can really be done in a very politically unstable world with significant natural and human-created calamities? And, to that end, how can they plan and handle their dynamic and enterprise risk management?
The only way to answer these questions is to have better-informed boards, to use real-time data and to understand the agility required to manage risks and opportunities.
Organisations must create sustainable shareholder value over the long term, with enterprise stakeholders playing a much greater part in shaping the future of the business. In fact, the impact of employee engagement/happiness, for example, is a much more significant driver for many organisations in the world today. Likewise, service providers and suppliers of raw materials and goods within a company’s supply chain not only have greater bargaining power but can also set expectations that relate to its code of conduct, ethical expectations, social accountability requirements and enterprise risk management.
This more complex coupling of business supply chains makes it imperative for organisations to normalise and align their overall long-term sustainability policies and practices with those of their supply chain – upstream and downstream. In the wake of significant corporate governance failures worldwide, risk management and governance must put sustainability at the heart of due-diligence processes to protect against value erosion and reputational impacts. What has shaped change in the past decade is not necessarily what will shape corporate governance practices in the decade to come.
The world is moving from an asset-based economy to a services-based one, which, in some ways, will drive a ‘naturally sustainable’ future, where less will be owned by organisations and customers. Other factors such as electronic currencies, rent-and-use rather than buy-and-own models, the changing way we communicate information and global transparency imperatives will transform organisations.
This will be a revolutionary change in how mankind views wealth through the ownership of material things. However, the move towards leasing assets rather than owning them outright may also mean that consumers demand less in terms of durability. Mobile phones are a case in point – the average owner of a new phone will upgrade to the next model within 12 to 24 months. This consumerism is putting significant stress on resources, which are being consumed much faster than we are able to reuse and recycle them.
From a resource perspective, and at a macro-socioeconomic level, food security, energy, shelter and safety will remain the basic human needs. The global population explosion and the increasing wealth gap between the rich and the poor will drive many more acute changes. All these will shape the move towards a different model of supply of goods and services to populations and will affect organisations’ sustainability strategies.
We are already seeing political systems in major economies moving towards greater protectionist policies as we enter a post-globalisation era.
So how will all this affect organisations’ boards? The UN’s Sustainable Development Goals (SDGs) will have a much higher-profile role in shaping approaches to sustainability, as organisations become aware of how sustainability issues and their own long-term growth and development strategies connect.
Major factors will include security; retaining organisational talent and industry knowledge as workforces age; and disruptive technologies. But as temperatures rise and natural calamities increase, organisations are already conscious of the serious risks from climate change. While they may be able to insure against these risks to some extent, the cost, in terms of premiums and potential interruptions to business continuity, means they must ask what they can do to reverse – or at least reduce – the causes.
Directors need to understand climate change, SDGs, sustainability indices and many other associated ‘technical’ aspects to be effective leaders. They will also be directly responsible for publishing factually accurate ESG reports to their shareholders. It will also be imperative to be familiar with the causal models that connect environmental and socioeconomic factors in the industries and societies within which
organisations operate.
These factors will shape the demand for a change in board and executive-level talent. Less traditional-thinking directors will drive that change, either as a younger generation of executives move into board positions or as the training and development of current directors intensifies. Either way, the mindset of individual directors and the collective wisdom of the board must be transformed to focus on the long term to ensure a sustainable value proposition. Interestingly, this includes the view on disruptive innovation changing the products, services and modes of delivery of an organisation in the face of technological, environmental and even political changes.
Regulations will still play an important role, and corporate governance codes will continue to evolve to create structured compliance and minimum standards that in turn maintain economic stability. But it is not so much standards that will shape social investment and corporate responsibility as stakeholder demands. The balance of power has been shifting over the past two decades, from shareholders commanding with wealth to stakeholders commanding with expectations.
It is high time for development programmes to concentrate on getting executives to understand the issues of sustainability, corporate social responsibility and environmental stewardship. As such, it is not even the triple-bottom-line approach that will prevail – it is integrated reporting, rather than traditional financial investment metrics, that organisations will need in order to demonstrate long-term commitment to sustainability. This has been clearly visible in the IFRS S1 and S2 sustainability and climate-related disclosure standards since the beginning of 2025.
New stakeholders will demand more socially and environmentally responsible businesses that provide greater holistic value, and leaders must prove that they are stewards of sustainable businesses rather than just leaders of organisations. Both state-owned and private businesses will have to support the nations in which they operate in terms of the SDGs. Board directors clearly need a good, holistic understanding of sustainability to ensure the long-term survival and prosperity of the organisations they govern.
Dr Waddah Ghanem Al Hashmi FIEMA is senior director, logistics and marine assurance, at ENOC, and an author and lecturer.
