Transformational Governance

Expanding the “G” in ESG through Transformational Governance

In recent years, there has been a dramatic increase in public support for laws requiring companies to work for a better society and increasing expectations for CEOs to speak up and act on a broad range of issues. Transformational governance provides a framework for business leaders to address these rising stakeholder and shareholder expectations by adopting a broader approach to their internal and external governance.

Transformational governance is a principles-based approach — not a new legal concept — that calls on business to be more accountable, ethical, inclusive and transparent to drive responsible business conduct, improve ESG performance and strengthen public institutions, laws and systems. This means fostering a culture of integrity, fairness and inclusion beyond legal compliance — asking not just what is legal, but what is right.

The targets of Sustainable Development Goal 16 - Peace, Justice and Strong Institutions - underpin Transformational Governance. Of the 17 Sustainable Development Goals, this goal is the least understood by businesses but arguably the most consequential to business. Peace, justice and strong institutions are essential elements of stable societies and prerequisites for governance that bind businesses to the communities in which they operate and serve.

Corporate purpose and stakeholder capitalism are crystallizing the attention and galvanizing action by businesses to meet rising challenges and expectations. These twin agendas have been gaining traction with a still limited but growing number of companies, mostly large multinationals that have long been committed to corporate responsibility and sustainability. That traction appears to be accelerating amidst a convergence of the aforementioned crises. The question now is whether the views of stakeholders will be heeded and corporate purpose will be demonstrated; whether statements will translate into actions and commitments into impacts towards the business of a better world.

The answer lies in the growing interest of business in SDG 16, pointing to a more expansive approach to the “G” in ESG or environmental, social and governance. Transformational governance is not a new legal concept but rather a prism through which businesses can expand their understanding of the “G” through three interrelated dimensions: Conventional Governance, Sustainable Governance and Global Governance.

Find out more about SDG 16 Business Framework- Inspiring Transformational Governance.