By: Anuj A. Shah, Partner at Grant Thornton Stax
Many corporate boards are engaging with sustainability at a moment when the operating environment is reshaping its business relevance. Trade fragmentation, industrial policy, energy security, supply-chain redesign, workforce constraints, procurement standards, climate exposure, and disclosure requirements increasingly influence the same variables that boards already oversee: growth, margin, capital needs, market access, and enterprise value. These pressures reach companies through different channels, yet they frequently converge in decisions about products, suppliers, operations, customers, and investment.
This shift is already visible in corporate governance. Morgan Stanley’s 2026 Sustainable Signals survey of 300 corporate sustainability decision-makers found that 63% of companies apply sustainability criteria to major decisions such as capital expenditures, R&D, product approvals, and M&A, while 62% assign responsibility at the board level. Yet 47% of respondents still see room to improve execution, citing data limitations and difficulty translating strategy into action among the most common barriers.
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In our view, adoption has moved faster than execution. Sustainability has entered corporate decision-making before many companies have developed the operating discipline to manage it effectively. Boards should address this gap by treating sustainability as a business system and applying a clear sequence: determine what matters, establish its commercial and financial relevance, assign ownership, integrate it into core decisions, and track the results.
Sustainability should be governed as a business system
Sustainability now cuts across product strategy, sourcing, operations, workforce management, customer relationships, risk, capital allocation, and disclosure. A supplier’s environmental performance can affect customer eligibility. Energy exposure can influence both margin and pricing. Product traceability can support regulatory compliance, brand credibility, and access to major accounts. Workforce safety can affect productivity, business continuity, and valuation.
These connections help demonstrate why sustainability rarely belongs to one executive or committee. The chief sustainability officer may coordinate the agenda, while the relevant decisions sit across finance, operations, procurement, legal, commercial teams, human resources, strategy, and investor relations.
The board’s role should be to ensure that management has created a coherent operating model around the issues that matter most. That requires clear priorities, defined ownership, reliable information, and an explicit connection to strategy and financial performance. With this architecture in place, sustainability becomes considerably easier to govern.
Simplicity should be a governance objective
Sustainability programs become difficult to govern when they begin with an exhaustive inventory of ESG topics rather than the economics of the business. Broad inventories may support reporting, but they rarely tell management where to focus attention or capital.
In our client work, we always start with business-model materiality: identifying the top three to five sustainability factors most likely to affect revenue, margin, costs, capital expenditure, working capital, market access, risk, or valuation. Those factors differ by company:
- An industrial business may focus on energy intensity, safety, permitting, and critical inputs.
- A consumer company may prioritize packaging, sourcing, product claims, and willingness to pay.
- A healthcare company may place greater weight on access, affordability, product quality, and workforce capacity.
That precision creates accountability. A focused agenda allows boards to ask sharper questions, assign ownership, track progress against defined objectives, and distinguish business impact from activity.
The board should require commercial and financial translation
Once the priorities are clear, management should explain how each one affects the business case. Sustainability initiatives should be evaluated through the same commercial and financial tests applied to other strategic investments:
- Do customers care, and can management demonstrate it?
- Does the issue affect access to markets, customers, suppliers, or capital?
- Can the initiative protect or improve financial performance?
- What are the costs of action and inaction?
- How will the company determine whether value is being created?
These questions keep the board within its oversight role. Management determines how to execute; the board tests whether the rationale is sound, the economics are clear, and the expected value justifies the investment.
Governance should connect information, accountability, and capital allocation
The purpose of sustainability governance is to improve decision-making, not to produce more reporting. Management owns the underlying data, controls, reporting, and external disclosures; the board should determine whether the information it receives is reliable, decision-useful, and aligned with the company’s strategy and risk appetite.
A concise board dashboard should clearly distinguish among five types of information:
- Compliance metrics covering required obligations.
- Risk metrics showing potential downside exposure.
- Value metrics tied to revenue, margin, customer access, or valuation.
- Execution metrics tracking progress against priority initiatives.
- Disclosure-readiness metrics covering data quality, controls, and support for external claims.
Accountability must be equally clear. Finance may own quantification, operations may own execution, procurement may manage supplier risk, legal may oversee claims and disclosures, and commercial teams may assess customer value. Responsibility will often be cross-functional, but cross-functional cannot mean ownerless. Management should designate one accountable owner for each outcome.
Once a sustainability factor is financially material, it should enter the same decisions as any other business priority, including annual planning, capital allocation, product investment, procurement, M&A diligence, enterprise risk management, and exit preparation. If it does not influence these decisions, sustainability is still being managed as a parallel program rather than as a business system.
A clearer board mandate
The board’s mandate is straightforward: identify the few sustainability factors that materially affect the business, require management to translate them into commercial and financial terms, assign accountability, integrate them into strategy and capital allocation, and monitor results through decision-useful metrics.
This approach gives reporting, compliance, and risk management their proper place within a broader system of business governance. It also removes much of the complexity that has made sustainability harder to manage than it needs to be.
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Boards that apply this discipline make sustainability part of the business agenda, governed alongside the other factors that shape growth, margins, market access, risk, and enterprise value. That is the practical meaning of sustainability as a business system.
About the Author
Anuj A. Shah is a Partner at Grant Thornton Stax and a senior leader in the firm’s Responsible Investing & Sustainability Advisory practice, where he draws on his capital markets and advisory experience to help boards, private equity sponsors, portfolio companies, and investment banks assess strategic risk, strengthen governance, and translate sustainability priorities into measurable business value.
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