Management Controls for Corporate Sustainability
Introduction
Introduction
More and more companies are striving to become sustainable, are disclosing their extra-financial performance and are benefiting from the array of opportunities presented by sustainable business practices across the environmental, social and governance dimensions of sustainable development. Naturally, companies seek to understand how sustainability could be managed optimally internally.
At Acuity, the solution offered to clients is the Sustainability Management Control Framework Model (copyright, 2024) (Ghosh, 2020) that is based on seven management controls found primarily in a large for-profit organisation. The constituents of the Sustainability Management Control Framework Model are as follows
Cultural controls
Strategic planning
Budgetary controls
Performance-measurement controls
Rewards-based controls
Administrative controls
Governance-related controls
These management controls are adapted for the effective management of both financial and non-financial dimensions of corporate activities and performance. The model is based on systems thinking, reflecting a holistic approach acknowledging the interdependencies that exist within each facet of management control.
Key aspects
Key aspects of cultural controls for sustainable decision-making:
Aligning sustainability with corporate mission, vision and purpose statements
Setting expectations around corporate sustainability, and legitimising actions
Communication, shaping expectations, developing sustainability-oriented knowledge systems
Creating shared value
Internal training and capacity enhancement
Employee-organisational value alignment
Key aspects of strategic planning for sustainable decision-making:
Identifying salient stakeholders, both internal and external
Assessing stakeholder expectations and perceptions of sustainability aspects affecting the company
Identifying material sustainability issues by surveying salient stakeholders
Conducting scenario analysis
Incorporating material sustainability issues in strategic plans
Applying analytical techniques
Developing firm-specific resources (internal capacity and capability)
Encouraging cross-functional participation and dialogue
Setting short-, medium- and long-term goals/targets
Key aspects of budgetary controls for sustainable decision-making:
Integration with budgets, itemisation
Investment plans
Budgetary allocations for sustainability
Immunity from financial distress
Participatory budgeting
Budgetary rigidity and sustainable innovation
Key aspects of performance-measurement controls for sustainable decision-making:
Monitoring sustainability-oriented goals
Use of sustainability KPIs for internal decision-making
Advanced PMS (e.g., lifecycle analysis)
Stakeholder (including employee) input in the KPI development process
Financially quantified sustainability KPIs (e.g., efficiency ratios)
Balanced score card
Interactive use of KPIs
Key aspects of rewards-based controls for sustainable decision-making
Rewards system alignment with sustainability KPIs
Used in rewarding workforce at different levels
Use of financial/non-financial rewards
Short-term/long-term perspective
How Acuity Knowledge Partners can help
We provided a brief overview of the relevance of each component of management control in promoting sustainable behaviour and an optimal way of managing sustainability internally. We help organisations assess their preparedness for management control. We provide a short questionnaire to employees at all levels, based on each of the management controls described above. It attempts to evaluate an organisation’s sustainability management practices and identify gaps and current focus areas. This enables us to gauge how an organisation manages sustainability internally and to identify best practices to address shortcomings.
About the Author
Dr Biswaraj Ghosh is a key member of Acuity’s Corporate and Consulting vertical and oversees project execution and delivery for clients across multiple sectors covering Climate Change, and a range of ESG services. He possesses several functional expertise including solving sustainability-related issues, developing decarbonization strategies, stakeholder engagement, ESG risk assessment, materiality assessment, climate management, sustainability management, target setting, KPI design, etc. through qualitative & quantitative research. He is a Copyright holder (UK and India) for the indigenously developed Sustainability Management Model as part of his PhD thesis. He is also a published author, an international ESG talk show expert..Show More
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