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Long-term versus short-term performance is a balancing act that boards of directors have dealt with for many decades within the private and public sectors.
Many organisations have also thrived for decades while delivering value for their shareholders, with leadership provided by directors that met the immediate demands of their owners without compromising future growth.
In the past, some organisations, it should be noted, have made strategic mistakes that have been costly and fatal sometimes, attributed to their poor response to the changing operating or competitive landscape, as revealed in many postmortem analyses.
Therefore, the topical conversation on sustainability and ESG today is not necessarily a foreign concept for boards of directors because its end goal remains the same in the context of an organisation.
However, it introduces a broad range of non-financial issues that organisations must assess to better manage the risks in their operating environment, take advantage of opportunities, and understand their positive and negative impacts on stakeholders.
As the complexity of the operating environment increases, coupled with the fierce competition and rapid technological disruption occurring, organisations must integrate ESG considerations into their overall strategy to ensure long-term survival.
Failure to incorporate these matters into their strategy conversations could result in lost market share, reduced competitiveness and, ultimately, the collapse of an organisation.
Organisations that consider these ESG issues improve their chances of long-term survival into the future and are better served by their leaders. Boards must, therefore, apply the standard processes used for deliberating, assessing and evaluating the impact of non-financial issues on their financial fortunes and cash flows.
They would also have to ensure that they are empowered to understand the sustainability issues arising today and how these impact the communities served, their operating environment and organisation as a whole while setting the appropriate responsibility for management, which is accountable to the board on how they have performed against the set ESG targets provided by the board.
Having the right understanding of sustainability is critical to driving the ESG agenda across the organisation.
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