Expectation from Future Boards

Environmental, Social and Governance (ESG)

The Institute of Directors has just conducted Dubai Global Convention 2023 with the theme “Building Future Ready Organisations”. The responsibility is to be shared equally by the directors and the senior management. Boards of the future can also be termed as ‘Boards: The Next Generation’. Major challenges facing future boards would be ESG; Transformative Technologies and Transformational Strategy to drive the next generation operational model. All these have been currently in operation in some form and have to be properly understood to effectively implement them for economic growth.

The ESG concept has emerged out of business sustainability; and has become deeply rooted into current business practices worldwide.  Projects that are not founded on ESG Principles face funding challenges. Business organisations, regulatory bodies and the general public must be on the same page to ensure smooth sailing of business operations. The Sustainable Development Goals have also emphasized on achieving ESG targets. In India, SEBI has emphasized on Business Responsibility and Sustainability Report (BRSR). Currently, BRSR is mandatory only for the top companies; and later it will percolate on to others. This express requirement will ensure that either, companies create their own capability for developing and presenting the report, or engage other consulting companies exclusively dedicated to BRSR. However, there is a risk that such consulting groups may use the same algorithm for multiple companies irrespective of its relevance and applicability. They will produce the report for the parent company, but its accuracy will need to be ascertained. This is an extensive exercise and when it will be extended to other companies, the outcome reports will need to be thoroughly evaluated and close scrutinized.

Transformative Corporate Technologies

Transformative technologies are rapidly changing the way businesses operate. From Artificial Intelligence (AI) to block-chain, these technologies are reshaping industries and creating new opportunities for growth and innovation. One of the most transformative technologies today is AI. AI is the ability of machines to perform tasks that typically require human intelligence, such as learning, problem-solving, and decision-making. AI is already being used in a variety of industries, from healthcare to finance, to enhance productivity and efficiency. In business, AI can be used to automate repetitive tasks, such as data entry or customer service, freeing up employees to focus on more complex and creative tasks. AI can also be used to analyze data and identify patterns that humans may miss, providing valuable insights for decision-making. Transformative technologies are having a significant impact on businesses across industries. From AI to blockchain, these technologies are reshaping the way businesses operate, creating new opportunities for growth and innovation. As businesses adapt to these technologies, they will need to remain agile and open to change in order to stay competitive and thrive in the rapidly evolving business landscape.

Significant challenges are faced while introducing such technologies. Most significant is the cost of implementation. These technologies often require significant investment in hardware, software, and talent, and the cost of acquiring and maintaining them can be prohibitively high for many businesses. Another challenge is the potential for disruption. They are likely to have a performed impact on the nature of work and the labor market. There are many opportunities that transformative corporate technologies offer. Most important is the potential for increased efficiency and productivity. By automating the routine task and optimising the work flows business we can reduce cost and improve their bottom line. They can also gain new insights into their operations through data analytics and other tools, which can help them identify areas for improvement and make more informed decisions. The use of such technologies is likely to raise certain ethical considerations like privacy, bias, safety, autonomy, justice, responsibility and sustainability.

Transformational Strategy to Drive the Next Generation

With new challenges and opportunities now emerging it is necessary to look into the Transformational Strategy to derive the Next Generation. This will essentially be the responsibility of the Boards. Technological changes are taking place at a very fast pace and most of the decision makers are looking at the horizon to the year 2030. Governments, businesses and individuals all need to change the way they work. The world 10 years from now will look very different from today, as we undergo the impacts of climate change and artificial intelligence. We need to harness the full force of our collective innovation, ingenuity and creativity to unlock the exponential solution needed for all challenges that lie ahead of us.  The Boards will have to play an active role in building resilience. Resilience means both protecting against the downsides of potential shock and preparing to capture the upsides. A Board can help its executive team build the foresight, response and adaption capabilities they need to manage the future. Globally, the shape of future boardrooms is evolving. Heightened security, empowered investors, rising competitions, regulation, geo-politics and technological disruptions combined with the record pace and unpredictability of change to dramatically altering how Boards are comprised of, and how they operate. This complex ecosystem is shaking up board compositions, expanding and redefining what is expected of Boards and fundamentally changing what it means to be a Director. The role of the Board and demands on Board members are being evolved effectively, with more scrutiny, and higher expectations from directors including much more engagement around strategy, investor engagement and empowerment at the Board level and in succession planning. The institutional investors are also changing their perceptions at a rapid pace.

Various expert studies have shown that the growing Board responsibility particularly in the areas of ESG, diversity, agenda and board papers, and involvement with management is taking a new shape. New ways of working have evolved affecting the functioning of the Boards. These include: digitalization; Board structure; Board performance assessment; and Board responsibility, now and in the future. The future Boards would gradually involve more members to look outside the company and focus on the impact of external factors. This is because companies face disruptions from external forces more than ever, and these include changes in government regulations and policies, stakeholder activism, climate change, environment degradation, and social unrest.

Improving Customer Experience

Many companies began their efforts to change their customer experience with a broad aspiration to transform it. Executive launch disruptive initiative to delight customers with bold moves and innovations, but they often fail to quantify the economic outcomes of differences in customer experiences, so they often end-up having clear causes and unclear near-term results. Many customers experience ‘transformation stall’ because leaders can’t show how these efforts create value. Patiently building a business case can fund them, secure a buy- in and build momentum. The companies have to be clear about what it is worth and exactly how the improvements will generate value. It would be necessary to construct this link to create value for the business and then follow customer over time to quantify the economic outcomes of different experiences. Boards of the ‘Gen Next’ will have to provide the leadership to link the customer experience to value.

IOD preparing Directors for the Future Boards

Institute of Directors, (IOD) has been preparing directors for future boards through its ‘Masterclass for Directors’. It has launched a course on “ESG” Leading to “Certified Corporate Directors”. This new Programme facilitates a comprehensive and in-depth understanding of the key concepts and issues related to environmental, social, and governance (ESG) factors and their impact on a company’s performance and long-term sustainability. It focuses on understanding the responsibilities and accountabilities of the Board and the Directors in relation to ESG issues and how to effectively incorporate ESG considerations into decision-making processes.

IOD is also developing a Programme on “Emerging Corporate Technologies” for preparing directors to be future ready. This course will help them to acquire skills to help them to update with the latest technologies that can help their organizations achieve success. The Programme has been developed to provide a practical understanding of how these technologies can be used to improve business processes, enhance decision-making, and increase efficiency. Overall, the program is an excellent opportunity for directors and senior executives to gain the knowledge and skills they need to stay ahead of the curve when it comes to corporate transformative technologies.

This Masterclass Programme will help in upskilling experienced directors of Boards who may not have the specific experience of transformational technologies. It will also reorient aspiring professionals towards new technological ecosystems and be ready for “Boards to handle Emerging and Transformative Corporate Technologies”.

IOD is creating a system for reorienting Professionals and Directors to effectively handle Next Generation Boards.