Is your board stewarding your company’s purpose? Probably not.

Research by Corporate Knights shows that board mandates as reflected in their charters fail to set out the board’s role in oversight of the company’s purpose. While there are exceptions, this purpose governance gap creates risk for companies and society alike. It intimates that companies are rudderless, and that society will be put off its ambition for a sustainable future.

Last year, I collaborated with Corporate Knights in the world’s first rating of social purpose companies, "The Social Purpose Transition Pathway: Helping Companies Move from ‘Say’ to ‘Do.’" The study found most board mandates described the board’s oversight of strategy, culture, risk and financial performance but not the company’s purpose — the meaningful reason it exists.

Investors already are beginning to demand information on the companies they invest in.

An early mover in this area is BlackRock, the world’s largest asset manager. It includes board oversight of the company’s purpose in its 2023 corporate engagement priorities as follows: "We [...]look for the board to have a clearly defined role in advising on and overseeing executive leadership’s approach to the company’s strategy, purpose and culture."

BlackRock describes a well-defined purpose  as "the reason a company exists and the role they play in society and across their value chain." It suggests that these companies are more likely to have a strong sense of direction that better position them to compete, navigate short-term challenges and achieve long-term growth.

A second driver propelling boards to up their purpose oversight game is the emergence of guidelines and standards for boards and governance professionals, the latest being a new report I recently authored called "Purpose and Stakeholder Governance Best Practices: Literature Review and Guidance on the Board’s Role in Purpose and Stakeholder Oversight."

Read the full article about purpose governance gap by Coro Strandberg at GreenBiz.