Governance for Sustainability

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Governance for Sustainability

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CSR Governance Guidelines

Boards of directors recognize that effective management of social and environmental risks can improve business performance. This realization has led to increased oversight by boards over how the company is managing its social and environmental performance as part of their fiduciary responsibility. This oversight is referred to as Corporate Social Responsibility (CSR) Governance.

These Guidelines provide guidance to board directors and senior management on a best practice approach for CSR Governance. The Guidelines are informed by CBSR’s experience with member companies, consultations with board directors and senior management representatives, and international research into global trends and best practicesFootnote 1.

The CSR Governance Guidelines have four components:

  1. An ‘Assessment Tool’ or checklist to help boards identify current practices and gaps
  2. A ‘Phased Approach’ or roadmap to help boards of directors develop a CSR Governance framework or methodology, including suggested Terms of Reference for a CSR Committee
  3. CSR Questions for Senior Management’ for directors to understand the firm’s approach to CSR management.
  4. Canadian examples of ‘Leading Practice’ in CSR Governance

Definition of CSR

Corporate Social Responsibility is defined as a company’s environmental, social and economic performance and the impacts of the company on its internal and external stakeholdersFootnote 2. Some companies use other terms for CSR such as corporate responsibility, corporate sustainability and “triple bottom line”. Other companies prefer to treat each CSR item separately, such as environmental management and community or employee relations, etc.

Implications of CSR for Boards

CSR issues can represent significant risks and opportunities to company performance. Oversight of social and environmental risk management and CSR performance therefore need to be incorporated into board governance to ensure that long term shareholder and stakeholder interests are protected and promoted.

Boards will want to understand how and when CSR issues can:

  • Impact or enhance a company’s strategy and vision
  • Necessitate board level oversight and accountability
  • Influence risk identification and management
  • Require changes to board composition and expertise, and
  • Improve external disclosure.

CSR Governance can be particularly challenging because CSR performance is often reported through different business lines, making it difficult for boards to have an overall picture of CSR. The development of an effective CSR Governance framework can help boards to ensure that CSR issues and opportunities are well-managed and maximized.

The authors

Andrea Baldwin is a director in the Toronto office of CBSR (Canadian Business for Social Responsibility). Coro Strandberg is the principal of Strandberg Consulting, a CBSR Associate, and author of a 2008 Conference Board of Canada report on CSR Governance. Industry Canada and Environment Canada provided funding for development of the CSR Governance Guidelines. For more information on the Guidelines, please contact CBSR at 416-703-7435


1. Assessment Tool

Boards seeking to develop or evaluate their CSR Governance framework can benchmark their current practices to those identified in the checklist below.

Notes for using the tool

  • CSR definition: CSR is defined as a company’s environment, social and economic performance and the impacts of the company on its internal and external stakeholders. Please tailor the checklist to your company’s chosen CSR terminology.
  • CSR approach: Some boards take an ‘embedded’ approach and integrate CSR throughout their governance mandate; other boards prefer a ‘focused’ model in which they organize their CSR responsibilities into one committee. These Guidelines support either approach, recognizing that ultimately it is important that boards perceive CSR as part of business strategy and risk management.
CSR Checklist
Elements Guidance Assessment Comments
Yes No Partial In Progress Don't Know Relevant? Notes

1. Vision and Strategy
Leading boards demonstrate their commitment to CSR and ensure it is incorporated into the firm's vision and strategy.

1.1 Have board and management agreed on and communicated an explicit commitment to CSR?

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1.2 Do board and management share a common definition of CSR as it relates to their company, their sector and broader societal trends?

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1.3 Has the board developed a common understanding of the company’s business case for CSR?

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1.4 Have board and management developed a CSR vision for the company?

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1.5 Is CSR incorporated into the company’s mission, vision and values?

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1.6 Does the company Code of Conduct / Ethics incorporate CSR?

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1.7 Is the board aware of CSR issues specific to the industry?

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1.8 Are material CSR issues considered in the development of the company’s business strategy?

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1.9 Are CSR goals incorporated into the company’s business plan / strategy?

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2. Oversight and Accountability
Leading boards have accountability for CSR.

2.1 Is there a committee(s) with responsibility for CSR (e.g. CSR, Audit or Governance Committee)?

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2.2 Is there a designated CSR officer with a reporting relationship to the board?

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2.3 Does the company have a board-approved CSR policy (either stand-alone policy or incorporated into other policies)?

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2.4 Does the board regularly review progress on the company’s performance against CSR goals, objectives and targets?

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2.5 Is management's compensation linked to performance on CSR goals and targets?              
2.6  Is CSR included as a factor in CEO recruitment?              

3. Risk Identification and Managment
Leading boards integrate CSR risks into their management of enterprise risk.

3.1 Does the company’s enterprise risk management program consider material CSR risks?

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3.2 Are CSR impacts, issues and opportunities considered when approving major decisions, including mergers and divestitures?

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3.3 Does the board have a means to identify the CSR impacts of its decisions?

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3.4 Does the board review its own practices to reduce the social and environmental impacts of board meetings?

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3.5 Does the board receive unfiltered information on stakeholder issues and concerns related to CSR to inform risk management?

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3.6 Are measures in place for the board to assess the extent to which the company’s CSR commitments are adhered to across the company, and within its supply chain?

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3.7 Does the internal audit process include cross-company compliance with CSR commitments?

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4.  Board Composition and Expertise
Leading boards are equipped to provide oversight on material CSR issues.

4.1 Does board composition reflect the cultural and gender diversity of the marketplace?

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4.2 Does the Nominating Committee include CSR skills, knowledge and experience as a factor in director recruitment?

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4.3 Does the Nominating Committee consider the alignment of company and individual CSR values in director recruitment?

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4.4 Does the new director orientation process include a review of the company’s CSR commitments and goals?

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4.5 Is CSR education provided to directors as part of their ongoing development?

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4.6 Is CSR competency included in the board evaluation process?

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5. External Disclosure
Leading boards regularly disclose information about the company’s CSR performance.

5.1 Does the board provide input into management's assessment of material CSR issues to include in the company's external reporting?

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5.2 Does the board review and approve external reporting of CSR issues in compliance with mandatory disclosure requirements (i.e. MD&A, securities reporting, government filings)?

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5.3 Does the board approve the CSR report as a record of the company’s CSR performance for disclosure to stakeholders?

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5.4 Does the CSR report to stakeholders include a message from the Chair?

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2. Roadmap towards Good CSR Governance

Boards seeking to enhance or expand their CSR Governance mandate should begin by understanding how their current CSR governance approach compares to best practice. The foregoing CSR Governance Assessment Tool is designed to guide boards and management through this benchmarking exercise.

The following is a roadmap of initiatives or steps to inform that process. The sequence will vary based on assessment results and board priorities, but the actions generally fall into two phases:

  1. Phase one: typical steps that board pursue in the early days of formalizing their CSR Governance mandate, and
  2. Phase two: the ‘next level opportunities’ that leading boards adopt to further integrate CSR into their governance role.

Getting Started

Assess current CSR Governance
Benchmark CSR Governance practices following the assessment tool. Identify relevant gaps and priorities for action. Develop a CSR Governance “action plan”.

Phase One—First Steps

Confirm desired CSR approach and integrate into the company’s mission and values
Conduct a CSR Commitment Statement session with Board and Senior Management to secure agreement on CSR definition, business value of CSR, and CSR vision and commitment. Integrate the output of the session into a board level CSR policy.

Mandate a committee with CSR responsibility
Include a CSR mandate either within a pre-existing committee, or within a new, stand-alone committee. For suggested CSR Committee Terms of Reference, see below.)

Educate board on CSR risks and opportunities
Include CSR in new director orientation and ongoing board education. Ensure that the board has adequate CSR expertise and knowledge to make informed decisions. Involve the board in regular review of material CSR risks and opportunities.

Provide oversight for CSR strategy and enterprise risk management
Ensure that CSR goals, objectives and targets are incorporated into the business plan and strategy. Include social and environmental considerations in risk identification, management and monitoring.

Consider CSR when approving major business decisions
Include consideration of CSR risk, opportunities, and impacts in major decisions, including acquisitions, mergers, business partnerships and divestitures.

Review disclosure of CSR performance to stakeholders
Communicate CSR commitments to internal and external stakeholders. Review and approve CSR reports, ensuring that CSR disclosure covers material risks and complies with CSR reporting standards.

Phase Two—Next Level Opportunities

Ensure effective CSR management systems
Ensure that policies, processes and data systems exist to support CSR and that CSR guides decisions across business units and geographies. Incorporate CSR into the company Code of Conduct / Ethics to provide overarching guidance on the significance and role of CSR as a factor in decision-making.

Provide formal mechanisms for stakeholder input
Ensure that mechanisms are in place for board consideration of unfiltered input from stakeholders.

Incorporate CSR factors into director and CEO recruitment
Explicitly include CSR in director recruitment, e.g., director diversity, values alignment and knowledge of or expertise in CSR issues/management. When recruiting a new CEO, ensure candidates are assessed for CSR competency and values alignment.

Reward executives for CSR performance
Incorporate non-financial objectives into executive compensation. Ensure that the company’s performance management systems reward CSR performance.

Implement “walk the talk” initiatives
Review the board’s own operations to identify and implement measures to align board operations with CSR, e.g. emissions from board travel, green meeting procedures, green accommodations, sustainable food services, etc.

Ensure continuous improvement of CSR Governance practices
Incorporate CSR questions into the annual board evaluation. Conduct a peer review to identify emergent CSR governance considerations and keep abreast of best practice.

Terms of Reference for a CSR Committee

The sample Terms of Reference below are a complement to the CSR Governance Assessment Tool and Phased Approach Towards Good CSR Governance. They include some potential roles and responsibilities for Board level CSR Committees and can be incorporated into a stand-alone or ‘focused’ CSR Committee or ‘embedded’ into pre-existing committee mandates.

CSR Committee Terms of Reference

Policies: Review and recommend CSR policies (including Codes of Conduct) and management systems; monitor compliance with policies, commitments and regulations.

Strategy: Review / recommend CSR strategies and plans; provide guidance to management on objectives and targets; provide oversight and guidance on CSR performance / progress.

Trends:  Monitor and provide recommendations on public policy, consumer, supply chain, stakeholder, environmental, corporate and general public trends, issues and developments that could impact the company.

Risk Management: Monitor and oversee CSR risk and opportunity management plans; review effectiveness of CSR issue identification and management.

Stakeholder Engagement: Review and monitor stakeholder relations; consider opportunities for direct stakeholder input into committee deliberations.

CSR Report: Determine overall scope of, provide input on, and recommend board adoption of CSR report.

CSR Assessment: Review and make recommendations on CSR impacts of major business decisions.


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3. CSR Questions for Senior Management

The following are suggested questions that directors can ask senior management to understand the degree to which CSR is being integrated into the firm’s management, operations and decisions. They may be helpful for directors wishing to raise CSR in the context of routine agenda business items and are complementary to the CSR Governance Assessment Tool. They are in no particular order.

  1. Enterprise Risk Management: To what degree are social and environmental risks and opportunities identified, quantified and managed in our operations? In our supply chain?
  2. CSR Trends: What are the key social and environmental issues that could affect our long term success? What are our competitors doing on CSR and how are they benefiting from this approach?
  3. Stakeholder Perception: What are stakeholder expectations for a company in our industry? Are we perceived to be meeting those expectations? What are the risks if we are not?
  4. Decision Impacts: Have we considered the social or environmental impacts of this decision? Does this decision align with our CSR commitments?
  5. Financial Investments: Does our investment / asset management policy incorporate environmental, social and governance factors?
  6. Operations: Have we taken advantage of opportunities to reduce our environmental footprint in order to generate operational efficiencies and cost-savings?
  7. Products and Services: Do our products and services advance social or environmental benefits? Are there social or environmental risks associated with the life cycle of our products that need to be managed, from design and production to use and disposal?
  8. Human Resources: Does our Human Resource Strategy reflect CSR? For example, is CSR incorporated into staff training and compensation?
  9. Impact Measurement: How are we measuring the social / environmental impacts of this area of our business?
  10. Integration: How is the management of social and environmental matters integrated into our core business processes, such as performance management, internal assurance and business planning?
  11. Brand and Market Development: Does our company and product brand include sustainability features aligned to our customers’ values? How can this help us advance market share?

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4. Examples of Leading Practice

The following four Canadian companies demonstrate leading practices in different areas of CSR Governance and are meant to demonstrate how CSR Governance can be applied in a public company context. Other examples of leading practice can be drawn from the co-operative and credit union sectors.

Cameco Corporation, based in Saskatoon, Saskatchewan, is one of the world’s largest uranium producers and has sustained its commitment to CSR through its rapid growth into international markets. Cameco is noted for its stakeholder management including its efforts to include stakeholders in the company’s management and board. The CSR mandate at the board level is shared across committees with leadership in the Safety, Health and Environment committee.

Gildan is a vertically-integrated marketer and manufacturer of quality branded basic apparel based in Montreal, Quebec.  Gildan’s board has become increasingly involved in CSR since 2002 as part of its risk identification and management mandate. Since that time, CSR has become integrated into Gildan’s broader corporate governance framework influencing its strategy and disclosure practices. Gildan’s board manages its CSR Governance through the Corporate Governance committee.

Loblaws Corporation Limited is Canada’s largest food distributor and a leading provider of general merchandise products, drugstore and financial products and services. Headquartered in Brampton, Ontario Loblaws manages its CSR Governance through their Environment/Health/Safety committee where the board focuses on oversight and accountability of senior executives to a CSR strategy. Relatively new to CSR, the Loblaw board has provided strong guidance to senior management through input into vision, strategy and disclosure.

Potash Corporation is a Canadian fertilizer company based in Saskatoon, Saskatchewan. PotashCorp has been working to include CSR in its board’s mandate since 1995 and now incorporates CSR principles in its vision and strategy. They are seen as a leader in external disclosure and have established board-level stakeholder engagement mechanisms. The board considers CSR issues within its risk management framework and through various board committees which have specific CSR mandates (compensation, audit, safety/health/environment and corporate governance/nominating).

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