D. CORPORATE SUSTAINABILITY, ETHICS AND ENDURING VALUE CREATION

D-1 Principle

Governing bodies should ensure that the organization is not focused on short-term profitability at the expense of long-term business continuity. In so doing, governing bodies should prioritize business ethics, corporate responsibility and integrated thinking to balance current and future needs in the interest of the long term sustainable success of the organization.

D-2 Rationale

Organizations have realized that a commitment to ethical behaviour, responsible corporate citizenship and integrated thinking leads to improved competitive advantage, reduced risk (especially reputational risk), improved innovation and ultimately corporate sustainability and enduring value creation. 

D-3 Key Aspects of Practice

D-3(a) Business Continuity

1. The governing body should ensure that:-

1. the organization’s strategic goals and objectives are reviewed and updated periodically to ensure that they remain viable, giving consideration to the economic and socio-economic climate; 

2. there are policies by which the organization is required to provide its stakeholders, including its regulators, with clear and concise reports on the organization’s impact on the natural environment, ecology and society as a whole;

3. responsibility and accountability are demonstrated by the organization’s continued reporting on its strategic activities and the associated outcomes on its socio-economic and environmental impact, including circumstances where the outcomes were negative and how this was being addressed and reversed;

4. key resources within the organization’s business model are developed and integrated to consider the overarching socio-economic and environmental systems in which the organization operates and that the sustainability framework and the activities in support of the said framework are identified as part of the organization’s business model; and

5. a business continuity and/or disaster recovery plan is developed, approved, and communicated throughout the organization, with testing and training periodically conducted as appropriate. The business continuity and/or disaster recovery plan should be periodically reviewed to ensure that it remains fit for purpose.

1. Where a risk management committee (or equivalent) has been established, it should identify and prioritize emerging risks which may adversely affect business continuity and determine how such risks should be managed by risk-abatement or risk-mitigation measures within the organization. These measures must be known throughout and regularly reinforced within the organization, in accordance with a communication policy that would inform stakeholders as to how these emerging risks are being managed.

D-3(b) Environmental, Social and Governance (ESG) Initiatives

1. The governing body should:

1. ensure that ESG is on the governing body’s agenda with a requirement for regular reporting between the governing body and management;

2. embrace integrated thinking as part of its ESG strategy so as to avoid the ‘silo’ effect; integrated thinking involves the balanced consideration of both financial and non-financial data when developing its strategy or making decisions;

3. develop, implement, monitor and regularly review policies such as its code of conduct and/or ethics, as well as employment, environmental and Corporate Social Responsibility (CSR) policies;

4. ensure open and honest communication with key stakeholders in accordance with its stakeholder engagement strategy; and

5. carry out an evaluation of the effectiveness of its ESG initiatives on an annual basis.

D-3(c) Ethical Behaviour

1. Ethical behaviour is a primary outcome for any organization desirous of aligning its business model to ethical values and principles and the governing body, by example, should ensure that its own members demonstrate the highest levels of ethical behaviour. This requires the implementation of a code of conduct and/or ethics which encourages members to: 

1. foster a top down ethical culture which rewards (by promotion) ethical behaviour and, conversely, punishes (by demotion or dismissal) unethical behaviour;

2. act prudently, in good faith in the best interest of the organization, taking into account inter alia the interests of its employees, owners, clients, regulators and other stakeholders;

3. avoid conflicts of interest and where this is unavoidable, encourages full disclosure at the earliest opportunity and recusal in decision-making;

4. act ethically beyond mere legal compliance, bearing in mind that it is impractical to legislate for ethical conduct;

5. assume collective responsibility for governing body decision-making;

6. be willing to account for all actions taken in the execution of its collective responsibility including delegated decision-making;

7. be transparent in the discharge of their responsibilities;

8. act fairly and decisively;

9. promote diversity in recruitment and promotion including (but not limited to) making appointments and promotions based on experience, academic qualifications, technical expertise, seniority, relevant industry knowledge and, conversely, to not discriminate on the basis of race, age, gender, political affiliation, sexual orientation, educational background and religion;

10. where there are no applicable laws, regulations or policies, comply with international best practice;

11. disclose aggregate remuneration for the governing body members and executive management including performance related benefits;

12. disclose its policies and performance in connection with environmental and social responsibilities and the impact of this policy on the organization’s sustainability;

13. disclose attendance at governing body and committee meetings and the frequency of and procedures adopted at these meetings;

14. disclose conflicts of interest in registers accessible to stakeholders and how the conflicts were resolved (if at all); and

15. identify material issues regarding stakeholders and environmental and social stewardship in accordance with governance best practices which encourages further disclosures (including the regulatory requirements) as corporate performance may require recognition of broader interests.

1. As part of its ethical culture, the governing body should:

1. encourage all leaders and members of the organization to:-

1. behave consistently in accordance with generally accepted moral values of what is right or good;

2. be accountable for and take personal responsibility for decisions;

3. be transparent in the treatment of and engagement with stakeholders; and

4. act with integrity.

1. cause to be prepared and implemented, until such time as appropriate legislation is proclaimed:-

1. whistleblower policies which encourage anonymous (or highly confidential) reporting of fraudulent, dishonest or improper organizational conduct and provides protection and immunity from suit for whistle-blowers and which punishes wrong doers;

2. procurement policies which promote fair and transparent procurement decision-making;

3. policies which discourage sexual harassment and workplace violence; and

4. dispute resolution strategies which encourage workplace discussion and, if necessary, mediation.

1. oversee organizational performance by assessing:-

1. whether the defined ethical principles are effectively guiding the organization’s culture (and not the other way around);

2. whether the key performance indicators for employee performance, include financial and non-financial metrics which foster an ethical organizational culture;

3. the organization’s level of engagement with its stakeholders;

4. financial performance and reporting to ensure that the organization remains profitable and sustainable; and

5. the organization’s progress on social and environmental objectives, which may include assessing the organization’s environmental impact, community outreach efforts, and diversity and inclusion initiatives.

D-3(d) Integrity Through leadership

1. The governing body should lead the organization effectively by ensuring ethical leadership throughout the organization and by:-

1. setting expectations for itself and fulfilling these expectations;

2. ensuring that sufficient and regular training is provided in respect of the code of conduct and/or ethics;

3. taking corrective action for those who fail to meet/breach these expectations; and 

4. assessing strategic/business outcomes, whether positive or negative, in order to determine whether expectations are met/fulfilled.

D-3(e) Ethical Leadership Dimension

1. The governing body should:-

1. ensure that the members of the governing body behave in a manner consistent with the organization’s ethical values;

2. ensure that the organization conducts itself in a manner consistent with its ethical values;

3. ensure that the organization treats its stakeholders in a manner consistent with its ethical values;

4. ensure that its actions and decisions incorporate the following ethical leadership values:-

1. accountability;

2. probity and integrity;

3. fairness and transparency;

4. emotional intelligence and competence; and

5. respect for diversity.

1. develop and maintain an ethical culture such that the organization is likely to derive the following benefits:-

1. a collective sense of belonging from shared values of ethics and integrity;

2. reconciling strategic dilemmas by creating organizational alignment through shared values;

3. holding internal stakeholders accountable for maintaining ethical organizational culture;

4. providing competitive differentiation for stakeholders by providing clarity in assessing the organization’s behaviour and performance; and

5. providing increased transparency, which creates value for the organization in the eyes of its stakeholders.

1. consider the following in managing strategic trade-offs:-

1. balancing short-term imperatives with long-term resilience;

2. competing stakeholder priorities;

3. the behavioural consequences of stakeholder interests; and

4. materiality and transparency of its reporting and public disclosures.

1. ensure that the framework for resolving trade-offs also considers the following:-

1. identifying the issues;

2. understanding and documenting the opposing perspectives;

3. identifying the advantages and disadvantages of each viewpoint;

4. reconciling the perspectives;

5. documenting the action plan; and

6. a commitment to resolve disputes/conflicts in an ethical and effective manner and using alternative dispute resolution mechanisms where reasonably practicable.

1. ensure that its adopted code of conduct and/or ethics is underpinned by the highest standards of business ethics to create an organizational culture which promotes governance through shared values of integrity, honesty, full disclosure and good faith.

(ii) The code of conduct and/or ethics should relate (but not be limited to) the following matters (subject to any existing legislation):-

1. related party transactions;

2. conflicts of interest;

3. procurement;

4. policy on acceptance of gifts and hospitality from third parties;

5. sexual harassment and violence in the workplace;

6. whistleblower policies;

7. disciplinary proceedings;

8. political patronage;

9. lobbying;

10. unauthorised disclosures;

11. breaches of confidentiality;

12. anti-discrimination and diversity in the workplace;

13. data privacy and information management;

14. workplace health and safety; and

15. safeguarding the organization’s assets.

D-4 Expected Outcomes

Having applied the recommendations stated here in accordance with the size, sector and complexity of the organizations, it is expected that organizations will achieve the following key outcomes:

1. Reduced organizational risk;

2. Improved institutional trust and confidence; 

3. More effective use of resources; and

4. Sustainable growth and increased market competitiveness.