Is the Boardroom Ready for Responsible Decision Making?

We live in times of transformation and we are in the middle of systems change. Profound decisions must be made in the boardroom on important issues, from climate change to AI.

But do executives and non-executives have the courage, knowledge and oversight to make strategic decisions in line with a better balance between people, planet and profits?

In practice, we see a frontrunner group achieving this, but we also see hesitation in many boardrooms to make proactive decisions for a sustainable future. A short-term focus combined with a ‘wait-and-see’ attitude is more common in boardrooms than desirable.

Limited attention and action towards sustainability

Research by BCG, Heidrick & Struggle and Insead revealed that in boardrooms across the globe, there is only limited attention for discussion around important strategic issues like climate change and sustainability. If we zoom in on sustainability, only 38% of the responding corporate leaders said that it was an integral part of their strategy. So, why is this?

Not many in the boardroom would deny the relevance of these themes, but it seems difficult to integrate the importance of climate change and sustainability with underlying people, planet, profit issues into the strategic decision making of organizations.

Most companies are risk-avoiding and show defensive behaviour in the boardroom instead of making proactive decisions that benefit business, society and the environment.

52% of the companies said they act on sustainability only if regulation and legislation require them to do so and 41% said they act if pressure on reputation by activists or shareholders brings them in the danger zone.

In most companies, the focus is on daily issues and short-term profits. At the same time, we see the need to explore the potential of sustainable and responsible business models for the years ahead.

The Green Deal in Europe and the Inflation Reduction Act in the US are massive industrial policy initiatives to stimulate business towards a sustainable economic landscape. The necessity to make strategic and responsible decisions on the impact of climate change, energy transition and sustainable living and working environments is evident. At least at the policy level.

The importance of data and dialogue interaction

Frontrunners in business see chances to move ahead with investments in new technologies, less energy-intensive processes and sustainable products. One of the key reasons is that these companies listen to consumers and have dialogues with experts and societal organizations.

It is not only opinions they want to hear, but they also want to have data that underlines a responsible strategy for the mid- and longer term. This data and dialogue interaction in and around the boardroom is important to make the right decisions.

There is momentum for an innovative, combined quantitative and qualitative approach to strategic decision making.

In numerous cases, we have seen a need to move beyond the traditional spreadsheets for financially based short-term decision making and beyond intuition and personal conviction for including non-financial aspects.

In our book, Responsible Business Decision Making we combine forces of data science and interactive strategy.

The Responsible Business Simulator and a 7-step framework

Both data and dialogue inputs come together in the Responsible Business Simulator, a highly sophisticated and transparent software instrument in the decision-making process.

It is an advanced mathematical calculation model that neutralizes bias and objectifies the strategic decision-making process by combining financial with non-financial information and using appreciation functions and weighted outputs.

Our novel approach helps to unleash the collective intelligence of the boardroom, professionals, stakeholders and the wealth of public knowledge. It simulates the reactions of decision makers and employees, presenting various probabilities in a comprehensible way through visualizations. This combined approach of data and dialogue provides a solid base for decisions and investments shaping the future of companies and societies.

The Responsible Business Simulator can provide concrete forecasts about the impact of sustainable investments on operational results. Those forecasts are presented in digital simulations that can be fine-tuned to different conditions, hence the fact that the model is referred to as a ‘simulator’. It can estimate the probability that a particular option for a strategy based on sustainability and social inclusivity will have a positive or less positive impact on the company. The results allow the board, management and employees to make decisions on the basis of hard facts on financial and non-financial items.

In the book, we explain a 7-step framework developed to guide decision makers and advisors through a logical path to reach strategic decisions that balance people, planet and profit.

Applying the 7-step model and using the Responsible Business Simulator can lead to greater insight on the part of the decision makers in the boardroom, to better prospects for investors and shareholders and to more transparency and accountability vis-à-vis the stakeholders – both within the company and externally in society as a whole.

Making the boardroom ready for responsible decision-making

It is the responsibility of the members in the boardroom to make decisions that benefit the future of companies and society in a world that is experiencing climate change and damage to nature and humankind.

There is no reason not to be ready to make strategic decisions in a responsible way. Now is the time to take responsibility and use companies as a force for good.