Most boards of directors will have been involved at a number of points in the development of the environmental strategy up to this point: in flagging the environment as an organizational priority, in approving the environmental commitment, and in approving the environmental strategy or plan. Some boards of directors might even have established an environmental steering committee or task force to advance most of the effort to this phase. Regardless of the degree of board involvement to date, it is very important that directors and management put their heads together to consider an ideal environmental governance and management framework going forward once the strategy has been approved.
The companion guide (CCA Sustainability Toolkit Part Two: Operational Framework to Improve Environmental Performance for Canadian Co-operatives) provides the nuts and bolts of an environmental management system (see Section 1: Management Systems) and will not be reviewed here. (See also Federated Co-operative Limited's profile in CCA's Environmental Casebook for an approach to an Environmental Management System for its Forest Products Division.)
This section focuses on key governance and business processes that require an environmental lens, guidance, or tools to ensure successful implementation of your environmental commitment and strategy. It looks at the role of the board, the management infrastructure, human resource management (including the role of green teams and environmental champions), and tools and processes for integrating sustainability into your budgeting and operating decisions.
This Guide takes the view that the board of directors should provide oversight for the co-operative's overall sustainability program, including its social and environmental priorities, as much as its business or service priorities. However, given that the focus of the Guide is on how a co-operative manages its environmental performance, this governance section looks at environmental governance. (There are detailed guidelines on the role of the board in CSR governance available in the Appendix.)
Given that the board will have, to this point, adopted and communicated the co-operative's environmental commitment (and possibly incorporated the organization's environmental ethic into the co-op's mission, vision, and values) and included environmental goals within the business plan or strategy, the balance of the environmental governance mandate pertains to oversight, risk management, board composition and expertise, and disclosure (adapted from CSR Governance Guidelines listed in the Appendix.)
A key responsibility for any board of directors is to provide oversight for the organization's environmental performance. Given that the environmental plan is included within the business plan, there will be regular reporting from management on overall progress. Some boards of directors establish committees of the board to conduct this due diligence and oversight role. Other boards integrate an environmental mandate within the audit, risk management, human resources, or strategic planning committees. Different approaches exist; there is no one right way. However, if you are planning to establish a committee for a board of directors, the terms of reference are likely to include the following components:
Review, recommend, and monitor compliance with environmental policies and management systems;
Review, recommend, and monitor progress of environmental strategies and plans;
Monitor and provide recommendations on environmental trends, risks, and opportunities;
Review and monitor stakeholder relations; and
Provide input into the scope of the environmental report, recommending the report to the board of directors.
In the area of risk management, the board of directors-possibly through an existing committee or an environmental committee-will provide oversight for a sound environmental risk management plan. As well, boards of directors are responsible for director recruitment, nominations, and director education, and will want to ensure that processes are in place to foster values-alignment and environmental awareness at the board level, as well as to orient new directors on environmental commitments, issues, and plans. Further, the board may wish to include environmental factors in its annual evaluation program.
For organizations with a CSR, sustainability or environmental report (see CCA Sustainability Toolkit Part Two: Operational Framework to Improve Environmental Performance for Canadian Co-operatives, Section 1, for a discussion of environmental reporting), typically the board of directors, or responsible committee, provides input into the scope and coverage of the environmental report and ultimately approves the report for public release. This approach follows the standard protocol for the approval and release of the co-operative's annual report and financial statements. Indeed, some organizations include their environmental or sustainability results in their annual report to members. It is good practice for the chair of the board (along with the general manager or CEO) to include a statement in the environmental or sustainability report, as is often the practice with annual reports. (See The Co-operators 2009 Sustainability Report as an example.)
Some boards, wishing to walk their talk, may want to review their own operating practices to determine how they can reduce the environmental footprint of their governance activities. Consider, for example, the possibility of paperless board meetings, reduced air travel, organic meals, etc. Boards set the tone at the top, and those that model sustainable behaviour to their members and staff can reduce cynicism and spur engagement and motivation.
A final-but most critical-role for the board of directors pertains to the senior leadership of the co-operative. Boards of directors are responsible for hiring the CEO or general manager, and for establishing executive compensation. These are critical leverage points for integrating an environmental ethic throughout the organization. Whether your environmental objectives are included within your Balanced Scorecard (see 3.4 Sustainable Decision-Making, below), or are part of a number of performance-related bonusable items, if you wish to engage senior leadership and staff in embedding environmental considerations throughout the co-op, it is essential that environmental factors be incorporated into the performance compensation of the CEO and senior leaders.
A critical success factor is a performance incentive system that rewards environmental effort.
Next to your board governance system, your human resources management system is key to achieving environmental performance goals. (The following is adapted from A Checklist on CSR and Human Resource Management, provided in the Appendix.) As mentioned, incorporating your environmental objectives into your co-op's performance compensation system will bring greater results. Those co-operatives that only motivate and reward traditional financial results will not achieve the environmental goals they have set for themselves. However, pay and bonuses are not the only tools available to human resources.
For co-ops seeking to integrate environmental considerations throughout their organizations, it will be important to incorporate your environmental ethic into your recruitment program, or your employer recruitment brand, in order to ensure you are recruiting values-aligned employees. New recruits will need to be oriented to your environmental commitment and goals. To better understand the environmental priority and strategy, employees may need training on environmental trends, risks, and issues for your industry and sector.
Many co-operatives have employee codes of conduct to guide the way business is carried out. Codes basically translate your co-op's principles and values into statements of appropriate behaviour. You may wish to revise your code to include your environmental commitment. Often employees need to hear from the board and senior management that they have permission to experiment with ways and means of integrating environmental considerations into their day-to-day business. The code of conduct can be one way to communicate this invitation.
Your co-operative may also need to review its job descriptions to determine whether there is an opportunity to incorporate environmental mandates into key jobs, or all jobs. Most jobs are impacted by environment and sustainability trends these days, so few positions are without an environmental dimension. Co-ops with defined organizational competencies, which drive deliverables and compensation, may benefit from integrating environment and sustainability factors into them. Performance plans, team goals, formal and informal reward systems, annual performance reviews, and exit interviews, can all be refreshed at this point to incorporate your co-op's environmental commitment.
Many organizations survey their employees annually to assess employee engagement and alignment. This is an opportunity to also determine the degree to which your employees perceive that the co-op acts in alignment with its environmental policy or commitment. Research has shown that employers with robust CSR and environmental programs are likelier to have greater engaged employees-leading to enhanced employee morale and higher employee productivity. It is worth the time invested to engage your employees in your environmental program and in monitoring employee perceptions on environmental integration within your co-op. The Co-operators survey its staff and other stakeholders annually to assess their perceptions of its sustainability progress.
A critical success factor is employee buy-in and engagement.
Finally, but significantly, co-operatives on the path to fulfilling their environmental commitment have a big opportunity to engage employees in achieving their environmental aspirations. It is often the case that a co-op's environmental efforts are first championed by employees on the shop floor. Co-operatives by their nature are philosophically aligned to employee engagement and participation. Encouraging, seeding, and supporting employee green teams are some of the means to motivate employees, and allow employee innovation and passion to flourish.
For successful grassroots engagement, senior leaders must provide active and visible support. It helps to ensure that the green team (there may be more than one) has a mandate, terms of reference, and possibly some budget. Usually the team is interdepartmental and representative of various business functions. Teams can also function at the branch or departmental level. They can be conduits for communication from the grassroots to the leadership and vice versa.
There is a debate in the sustainability literature regarding how best to organize the management infrastructure in order to foster employee buy-in and ensure progress towards an organization's environmental / sustainability goals. Some prefer to distribute sustainability responsibility across the organization rather than centralize it with any one individual or department. Others believe it is important to elevate sustainability to the executive or leadership level in order to signal organizational commitment, and to increase executive buy-in and mobilize interdepartmental support and engagement. Regardless, there are a few key features for most organizations initiating or enhancing a sustainability program:
An executive sponsor;
A person with responsibility for coordinating implementation of the strategy; and
An interdepartmental committee with responsibility for rolling out the strategy and monitoring its progress.
A critical success factor is a dedicated staff person.
The committee, typically chaired by a person with designated responsibility, provides status reports and recommendations to the executive on a regular basis. In addition, the sustainability lead often provides regular progress reports to the board of directors or board committee.
The Co-operators has an interdepartmental Sustainability Steering Committee and Mountain Equipment Co-op stores have sustainability coordinators responsible for implementing environmental initiatives.
Co-operatives that commit to integrating their environmental ethic into "the way we do business around here" will want to revisit the decision-making tools, systems, and approaches at the heart of their business or service in order to incorporate an environmental lens. Central to this is the co-op's financial management system and the decision-making process pertaining to budgeting, investments, and capital projects. Sustainable decision-making is defined as integrating social, environmental, and economic issues to reach conclusions, taking a long-term view and a "whole costs and benefits" approach. Sustainable financial management is the achievement of goals and use of resources over the long term, with full consideration given to social, environmental, and economic outcomes; it is a key driver of sustainable decision-making.
There are myriad models and theories of sustainable decision-making with no one method predominating. A key challenge is that most environmental and social goods lack a monetary value that can be readily quantified in a financial cost-benefit analysis. Many efforts are underway to develop sustainability accounting protocols wherein the external and intangible costs and benefits of an organization's activities are integrated into its accounts (i.e. costs not borne by the organization such as pollution, and benefits such as social amenities).
Organizations that use Balanced Scorecards (a strategic performance management framework that assists organizations to manage and measure strategy delivery) as a means of driving financial and non-financial performance could adapt them to incorporate their environmental objectives. Co-ops could start by integrating their environmental commitment into their internal effectiveness or member/customer perspectives. For example: Granny's Poultry Co-operative (Manitoba) Limited's Balanced Scorecard incorporates environmental sustainability through its "involvement with the community" indicator.
Some organizations use Structured Decision-Making models in which investments over a certain dollar threshold (i.e. capital projects and large value procurement) are taken through a process that builds in social, environmental, and stakeholder considerations. In this approach, the organization typically convenes a meeting of people representing diverse interests to define the problem or decision that needs to be taken; determines the environmental, financial, and social criteria or objectives for the project or decision; specifies how the objectives would be measured; brainstorms alternatives that could meet the objectives; identifies the consequences; and clarifies the trade-offs. (See Institutionalizing Sustainability at BC Hydro in the Appendix.) The objectives or criteria would be listed in a matrix, which would include the measures, the options, and the consequences or outcomes of the different decisions. This consequence table would be the basis on which the group discussed and resolved the most optimal outcome, often by ranking and weighting different objectives. This would include minimizing potential adverse impacts and resolving, as far as possible, conflicting or contradictory outcomes. In this way, environmental (and social) factors are explicitly considered in the decision-making, and are also the variables that can result in generating creative and innovative solutions.
Other organizations are experimenting with Sustainable Accounting models, which are very similar to the foregoing approach. In these models, the impacts and opportunities of a given decision are given monetary values, the value flow is discounted applying a Net Present Value test, and decisions are taken on more objective financial value terms. However, representing the external and intangible costs and benefits of an organization's activities in monetary terms can be very difficult to do.
A similar approach is referred to as Life-Cycle Costing or life-cycle assessment. This approach is used to evaluate the environmental and economic aspects, and potential impacts, of a product or project throughout its entire value chain-from raw material extraction, transportation, manufacturing, use, and disposal or end of life. The method calculates the true cost of the material components of products or projects, their use, and ultimate disposal or recycling throughout their lifetime, allowing for an efficiency comparison between similar projects.
Structured decision-making, sustainable accounting, or life-cycle costing are usually applied at the business casing stage of a project or purchase-early on in the process to allow for unexpected and more holistic outcomes.
When applying its environmental commitment to its financial investments and asset management, the co-op will move into the territory of sustainable investing, sometimes referred to as Socially Responsible Investing (SRI). Over the past few years, SRI has evolved to focus less on screening out good or bad companies, and more on integrating environmental, social, and governance (ESG) considerations into the investment decision-making process. This is a very technical and expert skill, so if this is of interest to your co-operative you may wish to explore with your investment manager ways and means to integrate ESG into your investments.
A co-op could also apply its environmental or sustainability commitment to decisions regarding business partnerships, joint ventures, and those with whom it does business. (See CCA Sustainability Toolkit Part Two: Operational Framework to Improve Environmental Performance for Canadian Co-operatives, Section 5, for a discussion of green purchasing and how you might apply your environmental commitment to supplier selection.) Some co-operatives adopt a set of sustainability screens or principles that set out minimal or optimal sustainability or environmental expectations for their business partners. The Co-op Bank, in the United Kingdom, is best known for its "Ethical Stance," which is a set of nine statements about with whom it will (and will not) do business in the areas of ecological impact, international development, human rights, and animal welfare.
This Guide takes the view that the board of directors should provide oversight for the co-operative's overall sustainability program, including its social and environmental priorities, as much as its business or service priorities. However, given that the focus of the Guide is on how a co-operative manages its environmental performance, this governance section looks at environmental governance. (There are detailed guidelines on the role of the board in CSR governance available in the 
