Governance, strategy, and management approach

Processes are put in place to enable execution of all actions

Last updated: November 15, 2021

Overview

Organisations design their strategy and put in place suitable governance mechanisms and processes to enable effective management. Broad agreement on principles of practice has helped the market define the actions of impact management which can be integrated into financial management process.

Principles of practice establish the need for processes that integrate social and environmental objectives, and outline what these processes should include. Most principles of practice convey the importance of:

  • setting objectives (often in line with the SDGs);
  • engaging with stakeholders;
  • collecting and using impact performance information for decision-making;
  • disclosing the rigour of these processes and the resulting sustainability performance information.

Some principles also advocate for verification and assurance of sustainability information. Some of these differences exist because each set is tailored to a specific audience, other differences just reflect the evolution of market consensus since they were agreed.

Some principles are specific about the type of impact organisations should have. In turn, this will influence how an organisation designs its strategy and sets specific sustainability objectives. For example, the OECD Guidelines for Multinational Enterprises set out how businesses should act responsibly by laying out a process for the identification, prevention and mitigation of negative impacts. The UNEP-FI’s Principles for Positive Impact Finance ask organisations to make a positive contribution to one or more of the three pillars of sustainable development, once any negative impacts are mitigated. The Principles of Social Value ask organisations to optimise value for their stakeholders within the constraints of their resources.

Most initiatives that develop principles also develop guidance, tools and methodologies to support implementation and compliance. Some provide an associated assurance standard, so that organisations can have their adherence to principles assured by a third-party. The UNDP Practice Standards are aligned with the core principles, whilst providing indicators so that organisations can self-assess the quality of their practices.


Resources

Principles of practice

Principles are tailored to different sectors or types of organisation and the exact scope varies from one set of principles to another.

CFO Principles on Integrated SDG Investments and Finance

Last updated: 2020

Principles to guide companies in aligning their sustainability commitments with credible corporate finance strategies geared towards contributing to the Sustainable Development Goals.

Use this resource to:

  • Governance, Strategy and Management Approach: Integrate impact management and contribution to the SDGs into the corporate finance function. This initiative involves a fee for participation.

OECD Due Diligence Guidance for Responsible Business Conduct

Last updated: 2018

Guidance that provides practical support to enterprises on the implementation of the OECD Guidelines for Multinational Enterprises by providing plain language explanations of its due diligence recommendations and associated provisions.

Use this resource to:

  • Governance, strategy, and management approach: Assist enterprises with developing and strengthening their due diligence system, as well as processes related to impacts in operations, supply chains, and business relationships.

UN Principles for Sustainable Insurance

Last updated: 2012

Principles for the global insurance industry to address environmental, social and governance risks and opportunities.

Use this resource to:

  • Governance, strategy and management approach: Commit to considering environmental, social and governance risks and opportunities in insurance business, and to working with other industry participants to do the same. This initiative involves a fee for participation and requires periodic disclosure of progress.

UN Principles for Responsible Banking

Last updated: 2019

Principles for Responsible Banking (PRB) are designed to ensure that signatory banks’ strategy and practice align with the vision society has set out in the Sustainable Development Goals and the Paris Climate Agreement.

Use this resource to:

  • Governance, strategy and management approach: Commit to embedding considerations of sustainability at the strategic, portfolio and transactional levels, and across all business areas. This initiative involves a fee for participation and requires periodic disclosure of progress made towards implementing the specific requirements of the principles.
  • Set and revise objectives: the PRB has a range of associated guidance on setting targets
    • UN PRB Guidance on gender equality target setting
    • UN PRB Guidance on financial health and inclusion target setting
    • UN PRB Guidance on biodiversity target setting

UN Principles for Positive Impact Finance

Last updated: 2017

Principles for financial institutions and their public and private stakeholders to transition to an impact-based economy that can deliver on people’s needs and aspirations within planetary boundaries.

Use this resource to:

  • Governance, strategy and management approach: Use as a reference for key definitions and requirements for the delivery and assessment of positive impact finance.

Principles of Social Value

Last updated: 2015

Principles that provide the basic building blocks for organisations that want to make decisions whilst taking social value into account. They are intended to help organisations optimise value for all stakeholders materially affected by an organisations activities. SVI is developing practice standards to help organisations implement each principle to a point where they are accountable for their activities and are making decisions to optimise value.

Use this resource to:

  • Governance, Strategy and Management Approach: Set up processes to include social value data in management decision-making.

Standards of practice

Standards of practice provide a checklist to help companies put systems and processes in place that support effective internal management decision-making as well as external reporting. In this way, these standards are a relevant reference point for all actions.


Definitions

Assurance

The methods and processes employed to evaluate an organisation’s disclosures about its performance, as well as its underlying systems, data and processes, against suitable criteria and standards in order to increase confidence in the information for use in decision-making. The results are shared in a written conclusion called an assurance statement.

Source: Adapted from AccountAbility

Governance

The system of rules, practices and processes by which a company is directed and controlled.

Source: Institute of Chartered Accountants in England and Wales (ICAEW)

Impact

A change in an aspect of people’s well-being or the condition of the natural environment caused by an organisation.

Source: Impact Management Platform; Well-being defined as in OECD Well-being Framework

Management

The processes used by the organisation to identify, assess and manage sustainability performance.

Source: Task Force on Climate-related Financial Disclosures (TCFD)

Objective

Something that efforts or actions are intended to attain or accomplish. Objectives are SMART if they are: specific, measurable, achievable, realistic and time-bound.

Source: Cambridge English Dictionary; Management Review

Practice

A way of doing something that is the usual or expected way in a particular organisation or situation.

Source: Oxford English Dictionary

Principles

Guidelines followed by a professional group that may form a fundamental basis of the field.​

Source: Impact Management Platform

Stakeholder

An entity or individual that can reasonably be expected to be significantly affected by the organisation’s activities, products and services, or whose actions can reasonably be expected to affect the ability of the organisation to successfully implement its strategies and achieve its objectives.

Source: Global Reporting Initiative (GRI); OECD Due Diligence Guidance for Responsible Business Conduct; OECD Well-being Framework; Value Reporting Foundation (VRF) Integrated Reporting Framework

Strategy

A plan for achieving something or reaching a goal.

Source: Cambridge English Dictionary

Sustainable

Meeting the needs of the present without compromising the ability of future generations to meet their needs or overshooting Earth’s ecological limits (Brundtland Commission). In context of impact measurement, outcomes for people are sustainable if they are within the acceptable range determined by societal thresholds, and outcomes for the natural environment are sustainable if they are within the acceptable range determined by ecological thresholds (Science-Based Targets Initiative and Kate Raworth). Sustainability is the quality of being able to continue over a period of time (Cambridge English Dictionary).

Source: Brundtland Commission; Science-Based Targets Initiative; Kate Raworth; Cambridge English Dictionary

Verification

The act of showing or checking that something is true or accurate.

Source: Oxford English Dictionary

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