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UNEP Finance Initiative proposes a new model putting sustainability at the heart of governance and corporate boards’ strategic agendas

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18 Jun 2014

The United Nations Environment Programme Finance Initiative (UNEP FI) has published a report that proposes a new model of governance that puts sustainability at the heart of governance and corporate boards’ strategic agendas (“the report”).

The UNEP FI highlight that companies are increasingly recognising the “need to develop a sustainable strategy, where sustainability issues are integrated into the core of the business model”.  The UNEP FI indicate that “sustainability reporting is becoming mainstream” and cite Integrated Reporting as one area that is attracting increasing attention.  The report presents evidence of “superior financial performance” for companies adopting sustainable strategies and highlights that if companies are to adopt such sustainable strategies then “there is a need to create a governance model “that is able to supervise the formulation and execution of such a strategy”.

The report presents a case that current systems of governance are “ineffective in promoting a culture of sustainability” and proposes a new model of governance called ‘Integrated Governance’ that promotes sustainability as the core part of a corporation’s strategy rather than it being a peripheral part.

The UNEP FI comment that Integrated Governance is:

the system by which companies are directed and controlled, in which sustainability issues are integrated in a way that ensures value creation for the company and beneficial results for all stakeholders in the long term

To achieve Integrated Governance, the report identifies that companies will need to go through a series of changes proposing that there are “three major stages each with its unique characteristics that describe the journey each company has to go through to achieve a model of Integrated Governance”.  Each company will be at a different stage of the journey depending upon the level of integration of sustainability issues into their strategic agenda and consideration at board level and the report considers the actions companies may need to take in order to “reform their governance practices towards and Integrated Governance model”.

The UNEP FI highlight that the report “can be a good starting point for investors interested in sustainability, and how that is handled in well-governed corporations”.  It also highlights that the Integrated Governance model can be used by companies “as a guide to benchmark themselves against this new practice and their competitors and identify areas for improvement in their governance practices”.

The press release and full report can be downloaded from the UNEP FI website.

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