Understanding ‘Governance’ in Your ESG Program
Organizational governance (as described in ISO 26000:2010) is a system by which an organization makes and implements decisions in pursuit of its objectives. Governance systems vary with the size and type of organization. Organizational governance is present in every organization as one of its core functions. It provides the framework for decision-making at all levels of the organization.
This form of governance is not to be confused with corporate governance. The decision making is usually influenced by the leadership of the organization. Governance enables the leadership to take responsibility for the risks associated with its activities and make decisions to embed sustainability into the organization. Responsibility can be extended when the organization and its leaders commit to relationships with other organizations and the community at large. Effective leadership is critical to the success of the governance system. This is true not only for decision making, but also for effective motivation of the internal stakeholders to make sustainability part of what they engage with every day. Governance seeks to make sustainability part of how the organization operates.
Organizational governance provides the framework or rules, relationships, systems, and processes that enable authority to be exercised and controlled within an organization. This includes the way the organization and those people that lead it are held accountable. If the governance is effective, it is more likely that the organization will be able to meet its objectives in an uncertain world.
The other category of governance is referred to as “corporate governance.” A board of directors is a governing body of elected or appointed individuals who jointly oversee an organization’s activities for multiple-year terms. The functions of boards of directors are determined by the powers, duties, and responsibilities
It is now understood as the processes by which the policies, strategies, and operations of organizations are regulated, operated, and controlled by the “board of directors” to give them overall direction and control, and satisfy reasonable expectations of accountability and performance. This embraces regulation, structure, best practice, and increasingly, the ability of boards of directors. To govern the organization, basic functions of boards of directors are to establish vision, mission, and values; set structure and objectives; select appoint and support the chief executive officer and assess the performance of senior management.
A board of directors is a governing body of elected or appointed individuals who jointly oversee an organization’s activities for multiple -year terms. The function of the board of directors is determined by the powers, duties, and responsibilities that are typically detailed in an organization’s by-laws. To give the organization basic functions, boards of directors are to establish vision, mission, and values; set strategy, structure and objectives; select, appoint, and support the chief executive officer and asses his or her performance; delegate to management; promote effective organizational planning; make available adequate financial and other resources, provide proper financial oversight; ensure legal and ethical integrity; maintain accountability; determine, monitor, and strengthen organizational performance, and give account to shareholders for that; be responsible to relevant stakeholders; enhance the organization’s public standing’ evaluate the board’s own performance; and recruit and orient new board members.
Dr. Bob Pojasek
Sustainability Legend | ESG Reporting & Disclosures | Uncertainty Risk | Pollution Prevention Expert | Process Improvement | Organizational Sustainability Reporting | Sustainable Procurement Professor
Chairman, Education and Research Executive Board (EREB)
VCARE Academy Inc. Managing Director
Center for Corporate Performance & Sustainability
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