Social and ethics committees are gaining traction, but challenges remain.

Building credibility for the sustainability agenda

​Three years ago on 1 May, the requirement in the new Companies Act for social and ethics committees came into effect.  It’s probably not an exaggeration to say that confusion reigned at the time. The Act and its enabling regulations were just not clear, and peoples’ aversion to change was complicated by genuine bewilderment.

So great was the confusion that EthicsSA and the Institute of Directors in Southern Africa began running workshops to help companies get a handle on this new concept.

Perhaps the biggest achievement of this new committee is that sustainability issues are now a regular board agenda item. Most social and ethics committees have settled into a rhythm of meeting prior to scheduled board meetings, and their reports are tabled at the subsequent board meeting. As a result, sustainability issues have become a regular subject for top-level discussion and scrutiny. It is impossible to overestimate the long-term impact this is having—by making social and ethics issues part of the business-as-usual agenda, they are slowly becoming incorporated into the operational DNA of companies.

A related achievement is that because these issues are being thought about and reported on regularly, the sustainability and integrated reports are becoming much more credible and useful. In truth, many of these reports were put together in a hurry and did not necessarily reflect what truly went on.  But when management has to report regularly on these issues, the content of the sustainability report is generated by institutional processes, and thus better reflects what happened.

However, it needs to be noted that there remain a number of challenges to be overcome.

First, the inexact and incomplete legislation and regulations continues to cause confusion. Legally, the position is still that the committee has only a social mandate. Leading companies have used King III as their guide and have incorporated ethics, but this is purely voluntary. It is to be hoped that this omission is rectified by legislators soon.

A structural challenge is the fact that the mandates of social and ethics committees can overlap with other board committees, such as audit, HR and remuneration. These overlaps need to be addressed to prevent a “turf war” from developing.

A more difficult challenge is the fact that most companies are still grappling with how to produce the right content and quality of reports for the social and ethics committee. Committee members tend to be non-executive, so do not have the inside knowledge to be able to assess the reporting, whereas managers are often uncertain about what needs to be reported. A contributing factor is surely the lack of performance indicators for social and ethics issues, which also means it is hard for all parties to move beyond compliance to assessing the impact of social and ethics performance.

This expectation gap causes frustration all round.

Based on EthicsSA’s interaction with hundreds of companies at various training sessions, our overwhelming conclusion is that the key success factor is a social and ethics committee whose agenda is closely aligned with the company strategy. This breathes energy into the committee’s operations because members can see the strategic importance of what they are doing, and the board and executive management can see that the company is deriving real value from the work done by the social and ethics committee. For example, as we have seen, a mine’s long-term sustainability is dependent on its relationship with the surrounding community and its employees—exactly the sort of area for which the social and ethics committee takes responsibility.

To paraphrase, don’t ask what you can do for your social and ethics committee, but what it can do for you. If the committee is seen to be delivering value, it will continue to improve, creating a genuine virtuous cycle.

ENDS
​
MEDIA CONTACT: Juanita Vorster, 079 523 8374, juanita@thatpoint.co.za, www.atthatpoint.co.za

For more information on EthicsSA please visit:
Website: www.ethicssa.org
LinkedIn: Ethics Institute of South Africa
Facebook: Ethics Institute of South Africa    

---