Following a year of economic upheaval, organizations are left with no choice but to re-evaluate every aspect of their business. In the next six months of 2021, organizations will need to face existing challenges and come up with ways to build resilience and create sustainability in a rapidly evolving business environment. With continued uncertainty and increased investor security, board members will need to focus on the following trends in 2021:
Great Focus on the E&S of ESG
Out of the three areas of environmental, social, and governance, investors seem to be prioritizing environmental and social issues, which are expanding from their regional and national focus to a global occurrence.
Board members are now stepping up and working double-time to define, monitor, and integrate E&S issues that are important for their business and reveal what connections they have with their business in terms of risks and opportunities.
Better Oversight
Investors are now looking to board members to ensure the culture of the organization is resilient and it can change with the dynamic times. In addition, investors are now asking for more transparency in board involvement in the environmental culture and human capital management to find out whether the board is providing sufficient oversight.
Analysis of the corporate culture will be instrumental in this oversight. In 2021, directors should understand and acknowledge the impact of culture on recruitment, employee satisfaction and productivity, and retention rate. The senior management of an organization will need to satisfy the board that the company has the talent and the culture that is needed to implement a successful strategy.
An Enhanced Importance of Corporate Purpose
Stakeholder consideration and corporate purpose have historically been the most important norms in the business world. However, the amended Statement on the Purpose of a Corporation does not put the number one priority on maximizing shareholders’ return. Instead, the corporate purpose should now be driven by consideration for stakeholders’ purpose.
Although these changes have not yet been fully implemented, there is an increasing public opinion in many countries that seems to be shifting against prioritizing shareholders’ returns.
Leading with Diversity
Even though organizations have been pressurized to achieve diversity and inclusivity for over a decade now, the truth is that many have fallen short of social expectations. This is even more true when it comes to gender equality and reports during COVID-19 economy indicated that women were the ones who disproportionately had to bear the burden of the workforce during the pandemic.
In addition, many organizations also fall short of fulfilling their quota for ethnicity and underrepresented communities. These issues can all have a long-term negative impact on the productivity and growth of an organization if they are not promptly addressed.
Promoting Resiliency
Companies that hope to be successful will need to adopt agile and resilient approaches to come out better and stronger in the turbulent business environment, both in the boardroom and at the management level. Boards will need to preemptively predict change and address the opportunities and risks associated with key business trends. Some trends like the impact of climate change, future of work, and digital transformation are already disrupting the business models in the near term.
Implementing enterprise risk management processes to be more responsive to change can build organizational resilience and help create strategic pivots.
Bottom Line
Several other trends and challenges are likely to influence the manner in which boards function. Duringthe rest of 2021, it is expected that boards will respond by changing their thought processes and operational approaches and ensuring they modernize their behavior to adapt to the ever-changing business environment.
