The Role of The Board in Creating a Sustainable Strategy

While conceptually elegant, the belief that a corporation's role is to maximize value for shareholders is under increasing challenge as society's expectations for companies change. An equally elegant new concept that takes account of these dual pressures has yet to emerge, but terms such as "corporate social responsibility," "shared value," "theory," and "sustainability" are being heard more and more. The high-level rhetorical gloss that good performance on environmental, social, and governance (ESG) dimensions results in good financial performance and value creation for shareholders is too simplistic. Sometimes this is indeed the case but often these decisions require tradeoffs, at least in the short-term. Moreover, these decisions involve great uncertainty due to the lack of information and an understanding of costs and benefits. We argue that it is now essential for companies to have a deliberate process for making the tough decisions that involve short- and long-term tradeoffs involving shareholders and other stakeholders and that it is the responsibility of the board of directors to ensure that this process exists, and it is effective.