Defining good governance: A critical step towards sustainable development

Defining good governance as a global priority

We’re seeing a growing awareness of the importance of good governance, with issues spilling out of the secrecy of the boardroom and into public discourse. Our collective concern with governance is reflected in headlines about billion-dollar safety scandals, boycott movements to call out opaque financial practices and demand transparency, and a cultural expectation for products to do good as well as be good.

But with organizations operating across a spectrum of sizes, sectors, cultures and aims, how can we agree on a shared definition of good governing practices? And what yardstick can we use to measure an organization’s leadership? This is where International Standards come in.

Defining an ultimate purpose

At the backbone of International Standard ISO 37000 is the principle that all organizations should define their purpose: the ultimate value they create. For too long, organizational leadership has been judged primarily by financial results. Therefore, it follows that an organization’s purpose has tended to align with financial objectives. It is time for organizations to go beyond finances and start actively contributing to environmental and social welfare. Whether it‘s combatting climate change, supporting local communities or addressing social inequalities, an organization’s work needs to ultimately transcend revenue generation; it needs to also be a force for positive change.

Through its 58 participating members and 27 observing members, ISO/TC 309 – our technical committee – provides guidance on anti-bribery, corruption, whistleblowing and fraud controls, for example. This empowers organizations to avoid doing business with bad people and bad companies. But our standards also touch on internal investigations, conflicts of interest, human trafficking, modern slavery and diversity management.

Governance also touches on the ESG framework. While the G in ESG stands for “governance”, this mainly refers to business conduct. Good governance goes beyond this to integrate all silos enveloped in responsible management practices. It therefore governs the entire ESG framework as well as organizational performance and purpose.

To build a better future, the ultimate measure of an organization needs to move from profit to include actively working for people and the planet. The idea isn’t that every company does everything. Every decision made will naturally incur a mix of positive and negative outcomes on the factors that constitute value – financial, human, social, natural capital, etc. There will inherently be judgement calls to make and trade-offs to consider. This is why stakeholder engagement, a thorough understanding of sustainability thresholds and accountability are fundamental to good governance. With those three elements in place, every organization can navigate these decisions and optimize for their purpose.

Purpose backed by appropriate and proportional action

A well-defined purpose goes far beyond building positive workplace cultures or setting ambitious environmental targets. It acts as a North Star for decision-making, ensuring every choice aligns with the organization’s ultimate positive contribution. Crucially, it helps leaders and decision makers navigate lean times and judge their situation with foresight and perspective.

Achieving this purpose ultimately boils down to implementing systems by which an organization is directed, overseen and held accountable for achieving its defined purpose. Because good governance is about more than acting on purpose, it’s about acting appropriately and proportionally to deliver responsible outcomes.

We created ISO 37000 to provide guidance on how organizations can do this. Using the expertise of a committee with experience across countries and sectors, it equips governing bodies and governing groups with the tools they need to meet their responsibilities, so that the organizations they govern can fulfil their purpose.

Pertaining directly to the oversight element, ISO 37001, ISO 37002 and ISO 37301 support organizations with anti-bribery, compliance and whistleblowing management systems. This specifically equips organizations with the required tools to build effective internal control systems, reporting mechanisms, audits, and to apply appropriate corrective measures. But governance and integrity have also been adopted as key principles in other standards covering security, resilience and crisis management.

More than helping organizations themselves, these International Standards also give governing bodies assurance through guidance on internal and external audits, direct internal reporting and whistleblowing protocols. This gives them and other stakeholders assurance about the reliability of reporting, the effectiveness of internal controls and governance as a whole.

A shift in thinking

Good governance requires a significant cultural and philosophical shift. It is not a matter of quarterly meetings or annual reports, but a commitment to ongoing vigilance across compliance, risk management and integrated management. In many cases, it demands us to interrogate our own assumptions of success, and re-evaluate which companies and leaders we most admire, and why.

But with a shared understanding that we are barrelling down an unsustainable economic pathway, and a growing global feeling that crises are multiplying, this shift to prioritizing good governance is not only necessary, but long overdue. As we look to the future, the governance of organizations will remain a critical determinant of success and sustainability.

We are wholeheartedly convinced that our work in establishing and promoting governance standards is essential for building resilient organizations capable of adapting to change and leading in their respective fields. Our International Standards will not only be key to unlocking the full potential of organizations, they will help people and planet achieve sustainable growth in the years to come.