New Delaware Certificate Brings Authentic Sustainability into Boardrooms
Almost 90 percent of CEOs claim that sustainability is key to success. But what does sustainability success look like, and particularly from the board’s oversight role? More importantly, how do your company’s sustainability efforts stack up? Do key stakeholders understand your commitment? After completing multiple surveys, are your employees experiencing “sustainability fatigue?”
The Delaware Legislature recently passed the Certification of Adoption of Sustainability and Transparency Standards (CASTS) Act, which, according to the bill, “establishes a voluntary disclosure regime to foster dialogue around sustainability and responsibility among participating Delaware business entities and their various stakeholders.” That regime is called the Certificate of Transparency and Sustainability Standards.
Fifty-one percent of companies that operate in the United States are domiciled in Delaware, which makes this particular certification an attractive option for boards that are interested in deepening their commitment to sustainability measures.
There are several reasons to adopt the CASTS Certificate as a way to engender authentic, accurate, and measurable results for your company’s sustainability efforts.
Why Does Sustainability Matter to a 21st Century Business?
Sustainable business has been defined as business that meets the needs of the present without compromising the ability of future generations to meet their own needs. It’s a simple, practical, and valuable idea. It matters because contemporary consumers want their needs met and want to make sure they are part of a solution to environmental and social challenges. It matters because employees want good paychecks, but they also want to leave the office, factory, or sales floor feeling good about what they do. It matters because if business doesn’t act to preserve natural and social capital, governments will.
The good news is that sustainability doesn’t threaten business—according to a 2015 study by Arabesque Partners and Oxford University, it provides opportunities. The happy customers, motivated workers, and reasonable regulators that sustainable business engenders creates value for all stakeholders—shareholders included.
Despite the focus on sustainability, many firms treat it as marketing, a cost center, or a check-the-box exercise. But companies that silo sustainability will be left behind. Creating goods and services that meet the needs of current consumers and workers while preserving vital social and environmental resources is critical to long-term success—for the company and for the world at large.
These realities mean that sustainability is a topic that belongs on the board’s agenda.
A Simple Certificate with a Powerful Impact
Delaware’s new Certificate of Transparency and Sustainability Standards provides a perfect mechanism to initiate board participation in sustainability. A certificate requires that a board adopt principles, guidelines, or standards, as well as a set of assessment measures that gauge the company’s commitment to sustainability practices. The company must also make a commitment to publicly report against these standards.
The certificate solves the silo problem by bringing the board into the process. It’s more than marketing because it begins with the board. And it solves the check-the-box issue because it is completely self-created—a sustainability program that works for your company. It is available to any entity created in Delaware.
Broadcasting Commitment and Transparency
The Delaware Certificate is a simple, effective way to communicate commitment to key stakeholders. The certificate captures two critical components.
First, when a board has committed to sustainability, it shows the highest level of commitment:accountability and resources flow from the top. A manager working independently on a sustainability initiative may face resource challenges or feel unsure about priorities. Board commitment creates a framework for measuring success and institutional support, and garners employee confidence that will translate into confident customers and communities.
The second powerful aspect of the Delaware Certificate is transparency. Marketing sustainability is not enough. Too many companies take isolated actions and call themselves sustainable, using it for marketing and not much else. Try to find out what that company is actually doing around sustainability, and it can be difficult to find answers. By obtaining a Delaware Certificate, you are announcing willingness to show your stakeholders and the public your sustainability program.
A Delaware Certificate will signal that your business focuses on the well-being of all stakeholders—including employees, consumers, suppliers, investors, owners, and the local community. With a sustainable core, not only will the business thrive now, but stakeholders will understand that it will thrive long into the future.
Too many people today think of business as a problem—the source of social and environmental issues. The fact is that when business focuses solely on creating short term financial profits, it can create costly economic, social, and environmental risks. But the great majority of people involved in business are interested in solving problems, not creating them. Business provides food, clothing, housing, employment, progress, and most material needs that the world demands. A Delaware Certificate says “we are here for good.”
The Delaware statue introduced in this article is less than a year old. Early adoption is a leadership play and allows your board to set the pace, because the law calls for the user to create the standards. DSM North America, a global leader in sustainability, was the first company to obtain the Delaware Certificate under their innovative, forward-thinking leader, Hugh C. Welsh.
If your company’s board has yet to focus on sustainability, the Delaware Certificate provides the perfect on-ramp, with opportunity to address the issue at the board level, converge around a set of principles, guidelines, or standards, and a system for periodic assessment. The statute gives a company up to two years to file its first sustainability report, ensuring that the job can be done right the first time. This allows you to show your commitment to sustainability and to lean into the program at a pace that works for your team and your resources. For those who are already fully engaged, why not use this opportunity to communicate and lead?
If not now, when?
Frederick H. Alexander and Melanie George Smith, “New Delaware Certificate Brings Authentic Sustainability into Boardrooms,” NACD BoardTalk Blog (May 8, 2019)
Reproduced with permission. Published May 8, 2019. Copyright © 2019 National Association of Corporate Directors. These materials have been prepared solely for informational and educational purposes, do not create an attorney-client relationship with the author(s) or Morris, Nichols, Arsht & Tunnell LLP, and should not be used as a substitute for legal counseling in specific situations. These materials reflect only the personal views of the author(s) and are not necessarily the views of Morris, Nichols, Arsht & Tunnell LLP or its clients.