Diligent Q&A – Ivy Lumia on Sustainable Governance
Tell us about Best in Governance and your role there.
I am the Founder and CEO of Best in Governance — also known by our clients and partners as “BIG.” Best in Governance provides bespoke, modern, sustainable governance solutions for boards and executive teams.
When you think of the “traditional” aspects of governance — the performance and effectiveness of the board, board composition, overseeing audit, compliance, risk, privacy, etc. – these things are anything but traditional. In today’s world of increasing global complexities of social issues, fiscal challenges, and environmental and geopolitical impacts, the responsibilities of the board are amplifying. Organizations need to look at their governance structure holistically with a view to the future, to ensure that boards can manage the ever-growing agenda while continuing to operate at a high level and focus on broad, strategic matters. Concurrently, organizations are building sustainability strategies often siloed and not integrated into the fold of their overall corporate strategy. There is a disconnect here between governance and sustainability.
BIG offers two divisions of governance services — corporate governance and ESG strategy — which help organizations modernize their governance frameworks and fold sustainability into their corporate strategy to maximize opportunities and build resiliency for the future. We help organizations every step of the way on their governance journey, such as comprehensive governance risk assessments and governance-bolstering remedies like education, evaluation, stakeholder engagement, and optimizing their digital prowess via software solutions (like the Diligent One platform) to transform, empower and enable boards and their executive teams.
You were recently recognized as a Modern Governance 100 leader in the “Boards & Governance Innovator” category. Why is good governance important for business health and overall success?
There are so many issues bubbling up to the board level today — social demands, fiscal challenges, increased regulatory and legislative disclosures, environmental concerns, stakeholder engagement, the evolving workforce, the list goes on. Moreover, 75% of directors expect that the roles and responsibilities of the board will continue expanding in scope over the next three to five years; yet, many boards are operating with a legacy governance framework (structure, policy, processes) that may not be as efficient as it could be nor set up to meet a future that’s coming fast!
If the board is stuck in hindsight and oversight because their house isn’t in order, they may not be able to spend the time necessary for future-focused (foresight) deliberations and they’ll miss the big picture to position themselves well. Great governance means having disciplined and transparent decision-making and oversight of the organization, built on a sustainable corporate strategy and inclusive risk management framework which is all key to enabling long-term success. Recognition programs like Modern Governance 100 play an important part in shining a light on professionals who are striving for excellence and modern corporate governance practices.
How do you expect board composition to change as they become more forward-looking?
The nexus of growing social, fiscal, technology, and environmental impacts are highlighting the importance of enabling balanced diversity as a vital requirement to move business forward and reflect your stakeholders. But diversity is far wider than just gender! It is now both a societal and strategic imperative to address and balance social (gender, ethnicity, race, orientation, age, disability, etc.) with professional skills and experience, and also character (values and behavior). Most boards lack the strategies that foster a culturally healthy work environment that attracts, develops, and retains talent and promotes diversity and inclusion. There are also gaps in skills and expertise on boards as the world embraces new technological movements like AI and “black swan” events are becoming the norm. It’s time for organizations to ask, “If we built our governance framework today, would it look the same?”
One way to do this is to consider defining what the future state of your board should be, keeping in mind a holistic view of your governance structure to redefine and clarify the underlying needs of the board. These mindful conversations should consider emerging risks and how they might impact the transition from traditional governance to sustainable governance. One solution is a fresh look at your board committees. Transforming your board support via the committees is a practical next step to enable your board to focus on strategy and provide directors with the capability to lean in and provide attention where focus is most needed. There is a significant evolution of committees taking place as existing committees like audit, human capital and governance are morphing and emerging committees like technology or ESG are on the rise.
How can organizations take steps to plan for the future of governance?
In a world that is changing so rapidly, boards need to be practicing sustainable governance to build resiliency for the future. Sustainable governance is the foundational system, culture and principles enacted by the highest governing body of an organization, that considers environmental, social and economic factors to uphold, defend and maintain decision making for the benefit and resiliency of the organization, as well as the needs of its stakeholders. Directors that once made decisions with only risk and compliance hats, will now have to put on their sustainability hats as well and bring this mindset into the corporate culture with clear and measurable targets.
If you’re a corporate leader, your knee-jerk reaction might be to say, “Yes! Of course, we’re planning for the future…we’re renewing our board; we have an ESG committee.” But more thought is needed than just stand-alone actions like a new committee or agenda discussion topic. Your organization’s governance ethos will need to be mindful and deliberate if you want to position yourself for resiliency.
Lastly, what are some of the common challenges organizations face when they integrate ESG into their business?
I believe there is a convergence between the G in ESG and the G of ESG. The G in ESG are the “traditional” factors we discussed earlier (board performance, compliance, risk). The G of ESG is the governance of your overall sustainability strategy and we are seeing challenges with organizations interchanging these. Moreover, thanks to the ever-changing alphabet soup of discourse requirements on already over-burdened boards, political heat, perception of complexity and reliability of metrics, and keeping up with Joneses of competition, it’s easy for organizations to get overwhelmed. Many organizations make lofty sustainability commitments with no real plan of how to get there. Instead of sustainability built on a solid governance framework, they have a sustainability report, unratified by the board or unaligned with their corporate strategy, with no measurable actions or owners.
When you’re setting your ESG strategy, you need to look inward and create something best suited for you. There is no one size fits all. You’re not on an island alone – you’re in an ecosystem. What priorities are most important to your stakeholders? Chances are their risks may also be yours. Start with a basic plan, set goals that are measurable and manageable, and tell your stakeholders how you’re doing (including the hiccups as this is your opportunity to discuss mitigation plans and build credibility!) If you use a system of ESG measurement that is scalable, you can always refine your goals as you grow. The most important thing is to just get started.
