Chapter 1: In-country Governance
Definition: Corporate Governance
Corporate governance is the practice of ensuring a corporation conducts itself accountably, fairly and openly in all its dealings. It is the responsibility of a company’s board of directors. One of the main goals of corporate governance is to ensure a company’s leaders are managing the finances of the business effectively and that they always act in the best interest of stakeholders (shareholders, employees, customers, suppliers and creditors). Companies often have their own corporate governance frameworks—rules and processes for managing the conduct of the organization. Most also have to comply with external regulations or laws governing their industry or sector.
Source: BDC. (2020, September 12). What is corporate governance? BDC.ca. https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/corporate-governance
Governance is a multifaceted concept that holds the key to shaping sustainable development at various levels, from local to national and even global. It encompasses the systems, structures, and processes through which decisions are made, resources are managed, and power is exercised. Effective governance is vital in translating sustainable development principles into action and achieving the Sustainable Development Goals (SDGs).
Local Level Governance
At the local level, governance plays a crucial role in ensuring community participation and inclusivity. Local governance structures empower citizens to have a say in shaping policies and projects that directly impact their lives. When local communities are actively engaged in decision-making, sustainable development initiatives are more likely to be successful and aligned with the needs and aspirations of the people.
National Level Governance
On a national scale, governance systems vary widely across countries, reflecting diverse political, social, and economic contexts. Democratic governance models prioritize public participation, transparency, and accountability. In contrast, autocratic systems concentrate decision-making power in the hands of a few, potentially hindering the pursuit of sustainable development goals. Understanding these governance models is essential in identifying opportunities and challenges in achieving sustainability on a national level.
Challenge to Governance
One critical challenge that governance faces is the detrimental influence of corruption and lobbying. Corruption undermines the integrity of decision-making processes and diverts resources away from sustainable development initiatives. Lobbying efforts by powerful interest groups can skew policy priorities and hinder progress on sustainability goals.
This video asks if lobbyists are really as bad as their reputation.
Above the Noise. (2022, November 2). How does lobbying REALLY work? [Video]. YouTube. https://youtu.be/nhNsb6tVAI0
Governance and sustainable development are interconnected. Effective governance can create an enabling environment for sustainable development, while sustainable development principles can inform and improve governance practices. The SDGs provide a comprehensive framework for addressing global challenges and offer guidance to governments in shaping policies and strategies. Let’s also take a look at the ESG framework of responsible business practices.
Environmental, Social, and Governance (ESG)
Definition: ESG
ESG stands for Environmental, Social, and Governance, representing three critical factors that businesses and investors consider to assess a company’s sustainability and ethical practices. Environmental criteria evaluate a company’s impact on nature, such as its carbon footprint and waste management. Social criteria focus on how a company treats its employees, suppliers, customers, and communities. Governance criteria look at a company’s leadership, internal controls, and transparency.
By incorporating ESG principles, governance becomes more responsible, fostering sustainable decision-making and aligning business practices with societal and environmental well-being. ESG serves as a lens through which governance can be evaluated, promoting greater accountability and driving businesses towards a more sustainable path.
Governance serves as the backbone of sustainable development, enabling effective decision-making, resource management, and stakeholder engagement. From local community empowerment to national governance systems and global efforts to achieve the SDGs, governance plays a pivotal role in shaping a sustainable future for all. Addressing conflicts, enhancing transparency, and combatting corruption and lobbying are vital steps toward building inclusive and responsible governance that drives us closer to a more sustainable world.
Knowledge Check
Resources
- B Lab. (n.d.). How B lab drives a shift from shareholder primacy to stakeholder governance, and the difference between a B Corp and a benefit corporation. https://www.bcorporation.net/en-us/movement/stakeholder-governance/
- Cho, C. H., Bohr, K., Choi, T. J., Partridge, K., Shah, J. M., & Swierszcz, A. (2020). Advancing Sustainability Reporting in Canada: 2019 Report on Progress. Accounting Perspectives, 19(3). https://doi.org/10.1111/1911-3838.12232
- Emerick, D. (2023, February 9). What is SDG and ESG?. ESG | The Report. https://www.esgthereport.com/what-is-sdg-and-esg/
Corruption is a form of dishonesty or a criminal offense which is undertaken by a person or an organization which is entrusted in a position of authority, in order to acquire illicit benefits or abuse power for one's personal gain. Corruption may involve many activities which include bribery, influence peddling and embezzlement, and it may also involve practices which are legal in many countries.
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The act of lawfully attempting to influence the actions, policies, or decisions of government officials, most often legislators or members of regulatory agencies, but also judges of the judiciary.
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