Business
Newsday
Photo courtesy Dr Axel Kravatzky –
Caribbean companies are transforming boards and cultivating enlightened board practices driven by sustainability, stakeholder engagement and regulatory changes.
These trends, with implications for our companies, have been captured in a worldwide study by the University of Cambridge Institute for Sustainability Leadership (CISL) in partnership with DLA Piper. My TT-based colleague Seeraj Gajadhar was part of the CISL Future of Boards research team doing this study and co-authored some of the reports from the work.
The reports focus on the key trends across four domains or areas of effectiveness driving boards. Boards and their companies are categorised according to organisational logic.
In line with these organisational logics, we can also classify Caribbean companies into three main groups – business as usual (BAU), enlightened shareholder value (ESV) and purpose-driven organisation (PDO).
Legal frameworks and sustainability concerns
The study’s first domain examines the legal and regulatory frameworks that guide board practices, focusing on hard and soft laws related to sustainability.
Caribbean companies are increasingly navigating a complex legal landscape that demands a nuanced understanding of sustainability issues.
This legal backdrop pushes boards to adopt practices that align with sustainable futures, urging a shift from mere compliance to proactive leadership in sustainability.
Board practices: Purpose, strategy and reporting
The second domain centres on board practices, including integrating purpose, strategy, materiality and reporting into corporate governance.
Across the world, companies are witnessing a growing emphasis on defining and operationalising organisational purpose beyond profit maximisation.
This trend is coupled with increased incorporation of ESG considerations into strategic planning and reporting, signalling a shift towards more sustainable and transparent business models.
Board membership, structure and dynamics
Changes in board composition, structure and dynamics are also noted, with gradual trends towards diversity and the number of independent non-executive directors (NEDs).
The emergence of sustainability-related sub-committees and the importance of effective leadership skills are critical factors as board practices evolve.
Stakeholder engagement
The fourth domain discusses stakeholder engagement practices, highlighting a gradual evolution in how boards interact with shareholders and other stakeholders.
Companies, including Caribbean ones, increasingly recognise the value of engaging with a broader range of stakeholders beyond traditional financial shareholders.
This trend underscores the interconnectedness of business success and stakeholder well-being.
Organisational logics explained
Before delving into the implications of these trends, it is essential to understand the different organisational logics:
– BAU organisations adhere to traditional corporate-governance models, focusing on short-term financial performance and prioritising immediate profitability and shareholder returns over broader sustainability goals.
– ESV organisations recognise that long-term shareholder value is enhanced by considering the wider impacts of their business operations on society and the environment and integrating ESG considerations into their decision-making processes.
– PDOs operate with a core mission that includes contributing to societal and environmental well-being, viewing their role as agents of positive change, being committed to innovating board practices and engaging with stakeholders in meaningful ways.
Implications based on organisational logic
The implications of these trends for Caribbean companies vary significantly based on the underlying organisational logic.
In order to derive practical insights for possible action, boards can approach this from two directions – they can reflect on and discuss their underlying belief systems directly to discover what their operating logic is, or they can examine their response pattern to the trends.
– BAU organisations may see these trends as regulatory hurdles, focusing on minimal compliance without fundamentally altering their business models.
– ESV organisations perceive these trends as integral to their long-term financial success, embracing changes in board practices, diversity and stakeholder engagement as strategic imperatives.
– PDO see these trends as core to their mission, leading the way in innovating board practices and embedding sustainability into their corporate DNA.
Benefits of transitioning towards ESV and purpose-driven models
The transition of BAU companies towards ESV and, ultimately, to PDO models presents a transformative opportunity for Caribbean companies and societies.
This shift must lead to enhanced reputation and brand value, long-term financial performance, innovation and competitive advantage for companies.
This transition can contribute to economic diversification and resilience, environmental protection and restoration and social well-being and equity for Caribbean societies.
By investing in sustainable practices and industries, companies can help reduce the region’s dependence on traditional sectors and address some of the region’s most pressing environmental issues. This focus on social equity can lead to more cohesive societies capable of facing future challenges.
In conclusion, the transition towards ESV and PDO models offers a pathway to sustainable development that benefits both the corporate sector and society.
By embracing these models, Caribbean companies can enhance their resilience and competitiveness and contribute to a more sustainable, equitable and prosperous future for the region.
Dr Axel Kravatzky is managing partner of TT-based Syntegra-360 Ltd, vice-chair of ISO/TC309 Governance of Organizations and president of EUROCHAMTT.
He enables companies to flourish through integrated governance, certified management systems and transformational leadership.
