Managing the Accountable Business

As environmental stewardship, social accountability, corporate responsibility, and commitment to sustainable development become increasingly important to business success, corporations are considering how to change and strengthen key aspects of how they operate. Companies must now demonstrate higher levels of responsibility to their stakeholders—customers, employees, investors, and neighbors. Although companies face greater scrutiny and higher expectations, Battelle’s research indicates that most leading global industries still use standard financial, operational, and environmental health and safety (EHS) performance metrics that measure what has happened after the fact, when negative results may be difficult to reverse. Fortunately, new approaches to performance indicators help companies measure sustainability concerns (including workforce diversity, labor equity, and transparency with communities) and give managers tools to anticipate the potential impacts of the company’s activities on its stakeholders so that operations can be adjusted accordingly. Good metrics are essential to good management.

Managing the accountable business has never been more complex, and the strongest management systems are the ones that adjust to changing risk profiles and business climates. Corporate accounting and transparency scandals, terrorism at home and abroad, and concerns about global sustainability have raised the stakes enormously. The risks most companies face today are very different from the ones they grappled with a only a decade ago. Therefore, business and operations managers, EHS directors, and advisors on governance, strategy, and legal affairs are scrutinizing their assurance and communications systems with new intensity. They recognize the vital importance of ensuring accountability and communicating effectively with executive management and boards. And just as the risks are substantially different than a decade ago, they are seeing that mature corporate risk management systems are not sufficient to address the risks of today. New approaches are needed. Focusing on five key questions is a good start:

• Is your company’s corporate vision both relevant and meaningful?
• Are your company’s management systems current and responsive enough to ensure that not only are you doing things all right, but doing all the right things?
• Are your company’s performance measures and targets tracking and reinforcing the right information?
• Is your company reliably and completely valuing and disclosing EHS liabilities?
• Are your company’s strategy and work processes aligned with a renewed vision, and is your organization aligned to deliver on this strategy?

A recent Harvard Business Review¹ article suggests that too many companies have arcane vision statements that sound great but are irrelevant in a radically changed and evolving climate for business. A carefully crafted statement that expresses a company’s intention to generate profits by meeting particular societal needs in a socially responsible manner serves as a lodestar against which policies and operations can be measured. The next step is to make sure that the business strategy clearly articulates what the company wants to deliver to its stakeholders. The strategy should map out in detail how the enterprise plans to become the responsible business its vision statement demands and how it will sustain itself in a changing global environment. The company can then adjust its business processes and align its resources and organizations to support the renewed vision and strategy and to deliver the performance and results desired, consistently and efficiently.

Policies and management systems define how a company does business every day, so that time allocated to reviewing and updating them is well spent. Social, security, health, and accountability considerations are every bit as critical to the integrity of a company as EHS risks. As a result, EHS and operations integrity management systems should be reviewed to ensure they integrate these critical emerging elements. Equally important are credible liability valuation and disclosure. Few industries have yet studied and documented environmental and social liabilities to the extent that will be demanded of the accountable business in the emerging global business environment. Successful governance will require leaders to tap into the growing body of knowledge about performance indicators (particularly sustainability and “leading” vs. “lagging” performance metrics) and consistently using the right metrics can’t be overemphasized.

A business that tests and articulates its vision; aligns its strategies, processes, and organizations; and fortifies and adjusts its management systems, metrics, and tools for managing risks has positioned itself to meet the extraordinary challenges of our current global environment.

For additional information, please contact Dean Slocum at (781) 895-4887, slocumd@battelle.org.