Sustainability improves governance

Published on Tuesday, 4 June 2019

Sustainability is good for Italian businesses. So much so, in fact, that it is being increasingly integrated into the corporate governance of companies listed on the Italian Stock Exchange. Boards of directors are increasingly appointing committees dedicated to the subject, while economic incentives linked to environmental and social goals are multiplying.

These facts emerged from the “Boards of Directors and Sustainability Policies – 2018 Report”, the third of its kind. It was compiled by the CSR Manager Network, the Italian association representing over 150 sustainability professionals and managers, and by researchers from ALTIS (the Università Cattolica del Sacro Cuore’s Graduate School of Business and Society), in collaboration with Assonime (Association of Italian Limited Companies). The report, which was also supported by Enel and presented at Milan’s Università Cattolica on 30 May as part of the Sustainable Development Festival, was based on questionnaires and analyses of company documentation provided by a sample of 40 leading public listed companies in the FTSE MIB segment (the Italian Stock Exchange Index).

The results confirm that sustainability is becoming an increasingly valued part of the culture of Italy’s top companies to the extent that governance systems are being brought closer to the British and American model, which is considered the benchmark in this area. Indeed 80% of the companies have set up a committee within their boards with sustainability proxies. This is a remarkable increase with respect to the 25% of the 2013 Report and the 70% recorded in 2017. Almost three out of four of the boards have set up a special committee with several proxies. However, a growing number of companies are making the decision to go with a dedicated sustainability committee (15%). 40% of companies have also linked part of board members’ variable remuneration to socio-environmental performance (slightly up on the 2017 figure), which, on average, comes to 15.6% in the case of board members and 12% for the CEO.

“We are only at the start of the road, but it is already clear that sustainability has become an inescapable part of life for businesses,” explained Matteo Pedrini, ALTIS Research Area Manager.

“The report confirms the existence of a trend that has its roots in the Code of Conduct for Listed Companies approved 20 years ago,” added Italian Companies and Exchange Commission (CONSOB) Commissioner Carmine Di Noia. “Sustainability is being embraced because companies feel it is worth their while, also in terms of their reputation.”

The role of the Sustainability Manager

Many of the participants stressed how important new legislation is in stimulating the evolution of governance: a quarter of the committees with sustainability proxies were established in 2017, when legislation on compulsory Non-Financial Reporting (NFR) came into force. The report also focuses on the strategic importance of Sustainability Managers or CSR (Corporate Social Responsibility) Managers, who are working increasingly closely with their companies’ top brass.  

“In Enel, governance is sustainability: it is what drives us and this in turn drives change,” explained Giulia Genuardi, our Group’s Sustainability Planning and Performance Management Manager, “where sustainability became part of the company’s processes 15 years ago” and “where we are attempting to build a comprehensive, integrated vision of the business.” Genuardi also stressed the key role played by Sustainability Managers whose job it is to build connections between phenomena to create long-term value.

According to the report’s authors, energy companies are among the most advanced in terms of social and environmental issues. Massimo Giusti, Chairman of the Hera Ethics and Sustainability Committee, said that 30% of his company’s directors’ variable remuneration is linked to sustainability projects, while Terna Sustainability Manager and CSR Network Manager president Fulvio Rossi reminded those present of the growing pressure from investors and shareholders on all aspects of business, as confirmed by the Dow Jones Sustainability Index.

“Greater dialogue with people who evaluate companies’ sustainability performance creates added value for all,” Genuardi concluded. 

Mario Molteni, the Rector’s delegate for the Università Cattolica’s business relations, added: “I’d like to thank the participants for their advice on how the report could be improved,” thereby confirming that the research work will continue. We still have a long way to go on the road to sustainability.  

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