Ready to go to jail for your failure to act?
As an executive you have a duty to do what you believe is best for the company. You have a fiduciary responsibility to give the same care and concern to your executive matters as any prudent person would manage their personal ones.
Now, let’s meet Steward Fiduciary, a member of the board of directors.
Along with his fellow board members, Steward was elected by the shareholders to represent their interests; ultimately together they hire the CEO, set strategic objectives, approve annual budgets, and provide accountability to the shareholders regarding the performance of the company.
So far, so good.
Now imagine Steward Fiduciary is an accomplished executive with decades of work experience in C-Level positions. He feels ready to help stir the ship on behalf of the investors.
Yet he has no real understanding or familiarity with the strategic dimensions of sustainability. Up until now he has viewed sustainability as a nice-to-have or a marketing lever or simply a necessary evil to satisfy ESG (Environmental, Social, Government) regulations. Ultimately he believes sustainability is the responsibility of a department in the organization, but it’s not HIS responsibility.
But isn’t it? And shouldn’t it be?
And what if his failure to act on sustainability makes him liable?
Increasingly, investors in oil and mining companies are requesting those companies to disclose the risk they face from environmental litigation.
“The volume of international litigation relating to environmental and climate issues has grown rapidly over the past few years,” reports the Financial Times.
It goes beyond this article to explore if litigation finance is actually to effect positive societal outcomes or merely to make investors rich. Let’s not digress.
Organizations of any size have money set aside for just the possibility of getting sued. Hopefully the allocated funds can satisfy the litigation settlements. The alternative poses significant risk to the organization.
What about the liability of an individual board member, like Steward Fiduciary? In the documentary Beyond Zero, late Ray Anderson, founder and chairman of Interface, Inc., raised the notion of an executive going to jail for his failure to act on sustainability and taking care of our natural habitat. Is that reality now?
Total Reclaim, the electronic scrap processing company and largest electronic recycler in the Northwest United States, exported LCD devices to Hong Kong when they told U.S. customers they wouldn’t send the waste to Asia. The workers in Hong Kong were unaware of the dangers of being exposed to electronic waste and were crushing the screens without masks. The owners and CEOs, Craig Lorch and Jeff Zirkle, were sentenced to 28 months in prison and agreed to pay over $900,000 in restitution for proven fraud.
So, are executives and board members personally liable?
Have executives gone to jail for polluting our environment and emitting greenhouse gases? To my knowledge, not yet. But the call for greater accountability is out there.
Sustainability has become the new corporate imperative
What can Steward Fiduciary do to curb his liability?
1) Become a sustainability ambassador
Call out greenwashing or siloed sustainability departments and role model to the executive team the commitment to sustainability. Walk the talk with employees and all stakeholders.
2) Embed sustainability
Design sustainability into every process on the board level and below. Define problems to be solved from a sustainability perspective.
3) Agree on a new social contract
Making sustainable thinking and behaviors a habit is perhaps the most important and difficult part of the process.Learn how by attending this workshop: You Can Make A Difference
4) Foster ecosystem thinking and co-create with partners
Shift from a firm’s product-centric business model to a more systemic business model that links strategy, sustainability, and business ecosystems.
5) Treat nature as an asset
Find out what this means here.
6) Take the long view
Time to take a step back.
7) Learn about how pollution causes harm
Read the article.
It’s time to think of your fiduciary duty in a new, more expansive way by honoring your obligation to act on humanity’s best interest and leading others with vision and courage through uncertainty. It’s your duty!