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Tuesday, May 21, 2013

The future of sustainability: Ethical governance


 A new governance covenant, informed by sustainability’s principles and practices, must be more relevant to the unprecedented challenges we face on campus, in companies, in non-profits—and on the planet.

By Dave Newport

We don’t live in a dictatorship, says WorldBlu Founder Traci Fenton, so why must we work under one in our jobs?  

Fenton is one of the headliners of an emerging reformation of organizational leadership and management built on advanced principles of shared governance and sustainability. Her remark may be simplistic, but it opens up a conversation worth having about how to govern organizations for sustainability.

Radical “new” ideas like democracy, transparency, decentralized power, dialogue & listening, fairness & dignity and accountability are among the tenets of workplace democracy being embraced by brands like New Belgium Brewing, WD-40, Zappos, and Patagonia; and NGOs like Beyond Borders, Haiti Partners, and Taking It Global.  These “new” concepts work in public, private, non-profit, and educational institutions alike.

Indeed, as sustainability continues to mature as an organizational doctrine, many have begun to question how companies, campuses, and even NGOs can be fully sustainable while still locked in a vertical, command and control governance paradigm that may inadvertently disenfranchise staff and limit other stakeholders’ contributions to mission.

Sound familiar?

You know the drill.

Old-school organizations’ major decisions are made at executive and board level with limited input from staff or, frankly, other stakeholders. Stakeholder input may be public, but the decisions are made in mostly closed-door meetings. The information and documents related to that decision are generally not made public. And dissent against a decision is not a career-enhancing move for staff—or warmly received from outside stakeholders.

Sound like a bank, campus, or NGO you might know? It doesn’t have to.

For instance, at the recent CORE (Connected Organizations for a Responsible Economy) conference in Denver, a discussion of organizational sustainability included a employee/co-owner from Namaste Solar, the Rocky Mountain region’s largest solar firm—and a completely democratic 100% employee-owned B Corporation --that grew by leaps and bounds even through the Great Recession.

There’s a reason they are successful: efficiency. A democratic workplace creates Navy SEAL Team 6-level espirit de corps that drives productivity through the roof.

Does your organization operate at that high level of efficient teamwork? Well, the status quo wisdom is that real shared and democratic governance would take too long and deliver too mushy a decision to elevate teamwork to an elite level.

Au contraire.

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If their building’s on fire, they don’t hold a referendum…

First, what about the time; how long does it take to go from issue to resolution in a democratic workplace? Well, consider “normal” decision-making by executives behind closed doors. They may reach a decision very quickly, but implementation typically takes lots more time due to staff’s lack of understanding of, belief in, and consequent motivation to propel the decision forward.

At Namaste Solar and many other democratic workplaces, decision-making phase will run longer than unilateral executive decisions, but buy-in and execution are fairly instant because staff are bought into and knowledgeable of the direction. Thus the total time from decision to full-on implementation is much shorter than decisions that are executive mandated.

Second, shared decisions embody the human-dignity elements any sustainability organization should strive for under its social justice doctrine. There are no surprise layoffs, ill-considered strategies, or questionable expenses. It starts with open book transparency. Share the financials with all staff. Likewise, HR decisions incorporate group input. Share the rewards—and the risks; all the employees at Namaste are co-owners required to buy-in (literally) to the company (they will loan them the money) so that staff enjoy not only the rights but the responsibilities (including financial liabilities) of the firm.

Let's call it "ethical governance." These organizations offer more than “people are our most important resource” testaments, they govern by that principle.

And no, they don’t all vote on everything every day. That would be debilitating. Decision-making is tiered according to criticality. In crisis, a small team is pre-approved to make rapid decisions within the bounds of democratically derived policies. If their building’s on fire, they don’t hold a referendum.

Can this work in a corporation, campus, or NGO? Well…

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Can you say MOOCs?

Higher education is in trouble. Its educational franchise is being undercut by the democratization of education just as Craigslist revoked newspapers’ classified advertising franchise. The resulting demise of newspaper revenues coupled with the internet-spawned democratization of information made everyone a reporter so the Fourth Estate lost its information franchise too. Reporters were laid off in droves over that last decade, newspapers closed or sold, and circulation plummeted.

The same array of forces now faces higher education. Can you say MOOCs? Add to the democratization of education an ongoing erosion of state and federal funding, major increases in tuition, rapidly growing operating costs, and emerging skepticism of educations’ license to operate by some political forces. Higher education is under pressure, at a minimum.

Yet in the United States, higher education’s governance model has not changed much in centuries. In “Governance as Leadership,” three noted Harvard researchers proposed a new governance approach in answer to “so much empirical and anecdotal evidence that boards of trustees [model] is only marginally relevant and intermittently consequential.”

The trustees’ own professional organization, the Association of Governing Boards of Universities and Colleges (AGB), reports that “many presidents, governing boards, and faculty members believe that institutional governance is so cumbersome that timely and effective decision making is imperiled.”

It remains to be seen if higher education’s governance model can evolve quickly enough to provide the innovation, flexibility and responsiveness necessary to timely adapt to contemporary threats—and looming sustainability/adaptation challenges. We all certainly hope that it can.

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“Never waste a good crisis.”

As regards NGOs, consider AASHE’s recent stumbles. First, a mea culpa; as a member of AASHE’s Board of Directors, I accept and am humbled by my responsibility in the group’s financial bumps, poor personnel decisions, and damaged relations with stakeholders. My bad. The good news is it has energized the campus sustainability community and AASHE’s board and staff.  Look for significant responses soon.

However, in big picture terms, what I believe led to AASHE’s situation is the overlay of higher education’s governance model on an NGO. That’s not surprising given AASHE’s board and membership are drawn largely from the academy. So what naturally evolved as a governance paradigm is limited by the same management style that typifies higher education. It’s what we know.

That model may be the status quo for a campus—but it has never been the organizational doctrine of choice for an NGO. Non-profits must deliver a solid value proposition every day or stakeholders will stop writing checks. Campuses have federal and state grants, legacy students, major donors/alumni, endowments, room and board and centuries of brand that drive diversified financial support mechanisms. NGOs, not so much.

At AASHE, instead of a finely honed Navy SEAL Team 6, what evolved under our organizational model is distance between board and staff, board and stakeholders, and staff and stakeholders. Efficiency suffered, disconnection from member input limited responsiveness to rapidly moving sustainability trends, and not surprisingly revenues declined. Add to these systemic issues some unpopular personnel decisions and alarms went off very publically.

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If nothing else happens, an organization’s board deliberations should be open 
and stakeholders encouraged to participate.

After 30-something years in the environmental and then sustainability arena, I missed some opportunities to help fashion AASHE around progressive sustainability principles and practices. But new opportunity is before us all now. A new, more robust conversation has started and we want to elevate, refine, and learn from it. Years in the business have helped me compile a partial list of attributes observed in sustainability-leader organizations that can contribute to this conversation. While these should be considered for any sustainability organization, they all may not be appropriate to implement all at once—or at all—but conversation around these measures is very timely. These include:

Board Openness
·      Board meetings advertised
·      Board meetings open to public/streamed online
·      Public comment at board meetings allowed

If nothing else happens, an organization’s governance deliberations should be open and stakeholder input encouraged. Stakeholders deserve to listen and contribute to the conversation. They pay the bills.

Board Selection
·      Public process
·      Stakeholder election

The notion of “self-perpetuating” boards is averse to sustainability—and effective at inbreeding. Let’s take a lesson from biomimicry and genetics and remember inbred organisms develop major deformities. The same is true in organizations. Board members should be selected by stakeholders in some form of a consensus-building, democratic and transparent process. USGBC is attempting to migrate to that approach. Bravo to the green builders.

Board composition
·      Ratio male/female
·      Percent white

Higher education governing boards could improve their diversity. The Chronicle recently reviewed AGB’s latest survey and found that, “College trustees remain overwhelmingly white, male, and over 50….Whites account for 74.3 percent of the trustee spots at public institutions and 87.5 percent at private institutions…. Men outnumber women more than two to one on boards of both private and public colleges.” And “trustees are getting older, as baby boomers continue to dominate boards. At private colleges, 83.1 percent of trustees were over 50, up from 79.8 percent in 2004.” Sustainability NGOs and corporations may not be very different.

Board accountability
  • Board members self-evaluate
  • Board members rated by board
  • Board members rated by stakeholders
  • All ratings made public
Politicians push for accountability; even our democratic system includes an accountability mechanism for politicians: elections. However, college and NGO trustees are usually less accountable. Once installed, they can remain however long their bylaws allow. Rarely is a trustee uninstalled—or even publically evaluated—before their terms expire. A search of the Chronicle’s news archive uncovered numerous presidents resigning or getting ousted, but trustees are vanquished very rarely. Again, AGB and others recommend board self-evaluations. Yet it is unclear how many boards heed this admonition let alone purge themselves. NGOs and corporations don’t appear to do so very often either.

Board process
·      Public committee structure inclusive of stakeholders
·      Distributed authority
·      Staff present/participating in Board discussions and decisions
·      All Board and committee Minutes made public

This is an area where NGOs, campuses, and companies could learn from local government. The locals live on the front lines of stakeholder engagement. Want to know how local citizens feel about their government? Go to any public meeting and you will hear about it from citizens. So the locals roster their committees with lots of citizens in various advisory capacities. Issues get vetted in that crucible, then the elected boards have the benefit of citizen input and warning of citizen concerns when they take them up. In Adam Werbach’s book, Strategies for Sustainability, he talks about sustainable businesses doing the same thing; continuous stakeholder/customer engagement across the organization from customer service to strategic planning. That approach engages employees, uses transparency as a business tool, and reaps the rewards of a networked organizational structure. Again, the organization becomes more dialed in—and more efficient.

Transparency
·      All governance documents available to public (except personnel & litigation) online.

Transparency is a foundational principle of sustainability--not a heavy-handed disclosure doctrine--because transparency builds trust between organizations and their stakeholders. For today’s boards mindful of protecting brand, robust transparency should be a default practice as trust underpins reputation and brand. It’s also a smart way to foster engagement. Want to get closer to your stakeholders in order to hear more candid input? Then respect them with honest disclosure, warts and all. You reap what you sow.

Investments
·      Some level of Socially Responsible
·      Public investment committee with broad stakeholder membership
·      Disclosure policy
·      Divestment policy

Back in the day, 155 US college boards signed on to the move to divest of South African-related investments as a protest of apartheid.  155. There are over 4,000 U.S. campuses. Nonetheless, the 155 represented some heavy hitter schools with big endowments. It ultimately worked.

However, contemporary vetting of campus investment into various flavors of social responsibility has not followed suit. Indeed, while the nation’s socially responsible investment (SRI) industry has grown to over $3-trillion invested, campuses have not kept up, CHE reports.

Likewise, campuses pledged to the American College and University Presidents Climate Commitment (ACUPCC) may not fully embody its spirit until they have divested from oil, gas, and coal companies.  Only six small campuses have divested from fossil fuel firms, so far. Where are sustainability-NGOs investing their money? More responsive and transparent governance would not let these questions go unnoticed.

Reporting
·      Annual integrated TBL report
·      Separate sustainability report on goals

Public reporting has come a long way since the first sustainability indicators report was published by Prof. Chris Uhl at Penn State in 1998 or the evolution of the Global Reporting Initiative a few years later. But I have yet to see an integrated Triple Bottom Line (TBL) report from a campus—or a sustainability NGO. Hopefully, I will be corrected on that one. Companies are beginning to publish integrated reports.

Public commitment
·      Established first order goals (e.g.20% by 2020)
·      Established second order goals (Carbon Neutrality, Zero Waste, etc)

Ironically, many campuses have signed up for carbon neutrality and zero waste goals advocated by NGOs; however, not many of those sponsoring NGOs commit their own operations to the same goals. Just saying.

Most vs. Least Compensation
·      Transparent CEO:least-paid worker ratio    
·      Staff average % above/below living wage
·      Staff profit sharing or bonus system

The old top-down governance system rewards executives’ enhanced authority with increased salaries. Flatter organizations have flatter pay differentials from bottom to top. Namaste Solar, for example, started out capping salary differentials at 2:1. As they grew and had to deal with employee seniority vs. newbies, they voted to increase the differential to 4:1. But there’s little grousing about it because they developed consensus around the changes.

Planning process
·      Sustainability plan
·      Diversity/social justice plan
·      Engages stakeholders in strategic planning

Notwithstanding sustainability-critic Peter Wood’s commentary to the contrary, these should be easy elements to implement in NGOs and companies—and standard issue on campuses.

B Corporations
  • B Corp certification is to sustainable business what Fair Trade certification is to coffee or USDA Organic certification is to milk.
B Corps are certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. There is a growing community of more than 600 Certified B Corps from 15 countries and 60 industries working together toward 1 unifying goal: to redefine success in business. One such B Corp Fortune 500 firm, DaVita, has moved from command and control/near bankruptcy to a leading edge democratic workplace that has rebuilt its business to best in class.

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Having served on numerous non-profit and public boards over my career, 
I know most board members care deeply about the right things.

So, taken together, what does all this look like? Peter Bardaglio and Andrea Putman writing in “Boldly Sustainable,” offer a vision:

“We need then, a more inclusive and fluid approach that stands in stark contrast to the top-down arrangements of power and authority that characterize most colleges and universities. Leading from the center rather than from the top, creating a complex of interactive neutral networks that energize individual and collective efforts in alignment with the organization’s mission and strategic priorities is the central dynamic of the new inside-out leadership.”

Indeed, some campuses are making strides with sustainability and governance issues. Ball State won trustee support for campus wide geothermal—even dipping into its endowment to pay for it. BSU leadership developed this plan through innovative trustee-community conversations. Likewise, Green Mountain College trustees have approved a sweeping new strategic plan called “Sustainability 2020” that focuses the school’s entire direction on “authentic sustainability.” Likewise, GMC recently divested of fossil fuels and began to transition their endowment to SRI. Some small education-based NGOs are embracing democratic principles effectively in their work in Haiti, Canada, and elsewhere.

On the other hand, many non-profits that advocate for sustainability in education themselves labor under the old governance paradigm and its limitations.  Scanning the websites of several organizations including AASHESecond NatureSCUP and the US Green Building Council, I found:
  • All have board compositions that, in terms of diversity, generally mirror the white-male influence over college boards.
  • The path to board membership passes through uncharted waters. That is, none appear to allow direct, unfettered election of board members by stakeholders. Nominations may come from stakeholders, but they are vetted and slated offline before being offered for ballot. That said, USGBC’s election process appears the closest thing to open democracy.
  • Transparency policies are muted—with none approaching the level of transparency required even of public college boards or governments.
  • Inclusion of stakeholders in strategic planning may happen—but they are not formalized or systematic and ongoing.
  • I was unable to find investment policies that suggested SRI screening.
That said, these realities are not malicious; there is no conspiracy to hide deliberations or create white male majorities—or dodge carbon emission goals. Having served on numerous non-profit and public boards over my career, I know most board members care deeply about the right things.

However, we are all restrained by a system that may be inadequate to meet the needs of today—let alone the future—but has centuries of institutional inertia. The longevity of that governance system creates in peoples’ minds the de facto premise that it must work—and that reforms are na├»ve and cumbersome.

The book “Governance as Leadership” offers boards a pathway to effectiveness, relevance and sustainability via an approach that would foster many of the principles outlined herein. Likewise, AGB has been trying to gently reshape board governance for years. WorldBlu is a growing force advocating ten principles of democracy in the workplace whose time appears to have come.

The tools, ideas and examples exist.

So, can sustainability be fully embedded into companies, campuses and NGOs when their governance structure eschews its tenets? It won’t be easy. 

But we are not stuck. 

As they say, “never waste a good crisis.” AASHE’s difficulties are an opportunity not just to make that organization better as together we will, but they are a call for all sustainability professionals to think about an engaging, efficient and ethical governance model for all organizations seeking to advance the principles of sustainability. This new governance covenant, informed by sustainability’s principles and practices, must be more relevant to the unprecedented challenges we face on campus, in companies, in non-profits—and on the planet.

We must open the boardroom and C-suite’s inner doors; ethical governance and sustainability wait outside.

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