Transformational governance (“TG”) is a principles-based philosophy - not a new legal concept - that calls on business to be more accountable, ethical, inclusive and transparent to drive responsible business conduct, improve ESG performance and strengthen public institutions, laws and systems. Traditional corporate governance is limited to internal activities, in particular board and management composition and oversight. It does not embrace the realities of socio-economic, political, and environmental risk that are key to ethical leadership and the sustainability agenda. Transformational Governance is a prism through which businesses can broaden their understanding of the “G” in ESG, through an expanded vision and ambition for governance that aims to have impact both internally to a company and externally to society. We are calling on businesses to embrace a more holistic approach to the “G” in ESG that ensures that they consider wider society in their efforts.
The targets of Sustainable Development Goal (“SDG”) 16 - Peace, Justice and Strong Institutions - underpin TG. Arguably SDG 16 is the least understood by business but the most consequential to business. The SDG 16 Business Framework | Inspiring Transformational Governance helps businesses understand and implement the targets of SDG 16. It also promotes trust between private and public institutions and trust in those institutions by civil society.
The 2021 Edelman Trust Barometer found that businesses are under increasing pressure to drive societal change, with 86% of respondents expecting CEOs to speak up on a broad range of issues. This presents a strong case for businesses to embrace an expansive approach to the “G” in ESG through SDG 16 to address these increasing expectations from consumers, employees, governments, investors, regulators and society.
In addition, the 2022 Chief Legal Officers Survey by the Association of Corporate Counsel found the proportion of CLOs reporting to the chief executive has risen from 64% to 80% over the past four years. Almost a quarter of chief legal officers are now responsible for ESG, up nine percentage points from 2020.
In response to the rise of the CLO in advancing corporate sustainability, the UN Global Compact has positioned itself as a critical convener and thought leader in engaging these important gatekeepers within companies on ESG issues. Through our engagement with the legal profession – including through the SDG 16 Action Platform – the UN Global Compact will provide a platform for CLOs to engage in our work and ultimately play a critical role in fully embedding ESG and sustainability across their respective organizations.
At the Leaders Summit in June 2022, the UN Global Compact launched a Think Lab to operationalize Transformational Governance. Think Labs shape the Global Compact’s thought leadership on critical sustainability issues. It is by invitation only and will drive impact through two workstreams: (1) Operationalizing TG; and (2) Engaging Chief Legal Officers.
This Think Lab will:
- Define thinking, curate best practices and develop knowledge, guidance and tools that empower business sector action on TG through the targets of SDG 16.
- Deliver a corporate toolkit for businesses to socialize, mobilize and contextualize transformational governance within their respective organizations.
- Engage the legal profession at the highest level to share their perspectives in addressing dilemmas and developing ideas as they relate to TG and other ESG considerations.
The Think Lab will build on, leverage and amplify existing work, expertise and partnerships on SDG 16, notably on the SDG 16 Business Framework.