The Boardroom Awakening: Can Corporate Governance Survive the Sustainability Reckoning? | Frederik Otto, Director of Advisory and Head of Europe, AccountAbility

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The ESG narrative has become familiar but does not yet confront the challenges of a world where interest in sustainability is waning in some regions, political and economic divides are widening, and technology is reshaping the rules of the game.  How can boards maintain momentum on climate and social issues when governments are focused on regulation and public interest is fractured?  

In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses whether corporate governance can survive sustainability with Frederik Otto, Director of Advisory and Head of Europe at global consulting and standards firm AccountAbility. Previously, he founded and led The Sustainability Board, a globally recognised think tank for sustainable leadership and corporate governance. 

“The purpose of the company is not just to provide profits to shareholders, but to serve all of their stakeholders.”
Frederik starts by explaining that sustainability is intricately tied to governance through stakeholder management and engagement.  He recalls how the topic gained traction from 2017 to 2019, with influential figures such as Larry Fink of BlackRock and the US Business Roundtable emphasising that a company’s purpose extends beyond delivering profits to shareholders. That narrative led to a push for better oversight of sustainability issues.  

“The last five years have been quite the journey for sustainability.”
Frederik acknowledges that there is a sense of ideological fatigue around terms such as ESG and sustainability, and these words may even have become divisive, but the underlying issues remain critical.  He stresses that a board’s fiduciary duty includes ensuring sustainability matters are given due consideration.

“We were seeing all these shiny sustainability reports and board disclosures… …that were very explicit in how the corporation is providing value to all sorts of stakeholders.”
Frederik explains how the drivers of sustainability have shifted.  While employee activism and stakeholder pressure were dominant five years ago, economic challenges such as inflation and layoffs have reduced their influence.  Particularly in Europe, regulators have stepped in to fill this gap with legislation. 

 Frederik highlights three key sustainability trends emerging for the future:

1. Nature and Biodiversity - Risks such as biodiversity loss are gaining attention, along with opportunities like nature-based solutions.
2. Artificial Intelligence - AI impacts businesses through changes to business models, operational challenges like cybersecurity, and ethical considerations.
3. Geopolitics and Geo-economics - Global hostilities, trade restrictions, and national security concerns related to climate change are influencing board agendas.

“Do more scenario planning, do it more provocatively, and look as far as possible.”
Frederik stresses that boards must prioritise long-term sustainability goals alongside immediate operational challenges.  He identifies three core responsibilities for boards: routine governance, crisis management, and future planning.  He emphasises that robust scenario planning is vital for proactive governance, urging boards to explore even unlikely but plausible future scenarios. 

The three top takeaways for effective boards from our conversation are:

1.      Align the strategic, strategic intent between organisation management and the board, removing terminology
2.     Remove the words sustainability and ESG and consider these as global issues, systemic risks, and opportunities.
3.     Try to forecast better and spend more time on talking and thinking about the future.