The rise of sustainability oversight committees as part of modern board governance and oversight: Practical considerations

Abstract

Given the constantly evolving landscape, the intersection between corporate governance and sustainability has become a key topic for board members, shareholders and regulators who are seeking to ensure that companies remain competitive as well as relevant. This paper outlines how boards can become more effective in formulating strategic responses to the sustainability agenda through the creation of a specific sustainability committee, which is distinct from the risk and audit committees. It presents arguments for the creation of such a capacity, illustrating them with specific examples (such as materiality assessments). Focus is placed on the interactions with other key governance bodies (the risk, audit and remuneration committees) when such a governance body is being created, and it is suggested that solely applying a risk or audit lens is not sufficient and may create additional gaps in oversight. Finally, the paper discusses how a sustainability committee can become a ‘learning’ governance body, accelerating a sound understanding of how sustainability considerations can affect the strategy, opportunities and risks facing the company at different levels.