SosteniAbilita - Leading role of good governance in the sustainability challenge

Good corporate governance is fundamental for effectively integrating sustainability into business strategies and operations. The integration of sustainability is not simply an operational choice but a strategic imperative to preserve the enterprise value and meet market expectations.

To address this challenge, companies must significantly modify their business models, redefining products, services, and strategies. The company Board must align purpose, vision, and mission with sustainability, integrating strategic objectives with specific transition targets.

"Sustainability governance" encompasses the set of bodies, rules, and processes that allow for defining, implementing, and monitoring policies that benefit the environment and society. Key elements include:

• purpose and corporate strategy aligned with sustainability objectives
• adaptation of governance structures and creation of dedicated bodies
• development of specific competencies at all levels
• incentive systems aligned with sustainability objectives
• continuous dialogue with stakeholders
• effective measurement and reporting systems

In this regard, updating the Board's agenda is essential and includes: regular performance screening, integration of directors with diverse competencies, continuous personnel training, stakeholder engagement, identification of material aspects (double materiality), adoption of sustainability policies, creation of dedicated committees, and involvement of the entire organization.

The renewal of the Board of Directors is equally crucial, but Boards often continue to reflect a narrow range of age and competencies, with the CEO's influence remaining significant in the selection of new directors. Diversity, Equity, and Inclusion (DEI) is fundamental: the presence of diverse members is not enough; their active involvement and the creation of an open environment are necessary.

Governance extends beyond the board: the executive team must also be of high quality and effective. The "leadership paradox" represents an obstacle because managers who reach top positions thanks to competitiveness and personal ambition must then demonstrate their ability to collaborate for the good of the organization.

Incentive systems must integrate socio-environmental sustainability criteria. Effective design considers motivation, nature, and measurement of ESG criteria, strategic relevance, weight of indicators, time horizon, expected level, and independent verification of objectives.

Board committees, particularly the Sustainability Committee, are fundamental. The latter can be focused exclusively on ESG issues or integrate ESG responsibilities with other tasks. Its function is to provide specialized expertise, monitor sustainability performance, and ensure alignment between business strategies and ESG tactics.

It is the sole responsibility of the Sustainable Network Member to check the truthfulness, accuracy and completeness of the data and information entered on this web page, when within its competence and provided by the Sustainable Network Member. Borsa Italiana S.p.A. is not responsible for the contents developed by third parties and in particular by the Sustainable Network Member contained in this web page.