Sustainable value creation lies at the heart of effective governance. Organisations do not operate in isolation. Their long-term success depends on the health of the economic, social and environmental systems within which they operate. Increasingly, boards recognise that creating sustainable value or sustainability requires consideration of a broader range of factors beyond financial performance alone.
Organisations that achieve long-term success do more than generate financial returns. They create value in a manner that is sustainable over time and within the broader context in which they operate. This principle sits at the heart of the King VTM Report of Corporate Governance (King V) and reflects an evolving understanding that organisational performance and long-term viability cannot be separated from the health of the systems on which they depend.
While sustainability was once viewed as an isolated business function, often associated with compliance, reporting or corporate social responsibility initiatives, it is now recognised as an integral component of good governance. Boards are expected to understand how environmental and social considerations influence resilience, risk, stakeholder trust and long-term value creation. As a result, sustainability has moved firmly into the boardroom and now demands governing body direction, oversight and accountability.
This shift did not happen overnight. It is the inevitable response to practical, ethical and regulatory pressures. A business that depletes resources, alienates its workforce or loses community trust may profit in the short term but erodes the foundations of future earnings.
Sustainability reporting frameworks and standards
Globally, a wide range of sustainability reporting frameworks, standards and initiatives are used by organisations to communicate their sustainability performance and impacts. Those commonly referenced in South Africa are the Global Reporting Initiative (GRI), the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards (IFRS S1 and IFRS S2) and the United Nations Sustainable Development Goals (SDGs). While these frameworks serve different purposes and stakeholder groups, they collectively aim to improve the quality, consistency and comparability of sustainability-related information disclosed by organisations.
The Johannesburg Stock Exchange (JSE) has updated its Sustainability and Climate Disclosure Guidance to align with the IFRS Sustainability Disclosure Standards. Although applying this guidance remains voluntary, organisations should not mistake voluntary for irrelevant. Institutional investors, credit rating agencies and capital markets increasingly use sustainability-related disclosures as a basis for assessing governance quality, organisational resilience and sustainability-related risks and opportunities. As a result, many organisations are aligning their reporting practices in anticipation of evolving stakeholder expectations and regulatory developments.
For boards, the relevance of these standards lies not only in what they require organisations to disclose, but in the discipline they introduce. They encourage clearer information about how sustainability-related risks and opportunities are governed, how they influence strategy, how they are identified and monitored, and what metrics and targets are used to assess performance.
King v and sustainable value creation
While reporting frameworks and standards provide guidance on what organisations should disclose,
King V addresses a broader question: namely, how sustainability considerations should be integrated into governance and decision-making.
King V places sustainable value creation at the core of governance. The board is expected to ensure that the organisation’s purpose, strategy and business model support performance that creates sustainable value within its economic, social and environmental context. This requires integrated thinking, oversight of material sustainability-related risks and opportunities, and reporting that enables stakeholders to make informed assessments of how the organisation creates, preserves or erodes value in the short, medium and long term.
In this context, sustainability reporting should consider both financial and impact materiality (double materiality). The board, in other words, needs to consider the connectivity between financial and nonfinancial performance, assessing how sustainability issues affect the organisation financially and how the organisation’s activities affect people and the planet.
King V does not prescribe a particular sustainability reporting framework or standard. Instead, it places responsibility on the board to determine which frameworks and standards are appropriate for the organisation, considering its context, industry, strategy and stakeholder expectations. King V best practices provide the baseline, while applicable sustainability frameworks and standards provide the specific details. Together they work hand in hand to strengthen governance practices and reporting on sustainability.
Organisations wanting to claim application of King V must give effect to its accompanying disclosure framework, which standardises King V reporting and promotes more consistent and comparable disclosure practices.
The role of the social and ethics commitee
The social and ethics committee (SEC), whether statutorily required or voluntarily constituted, remains an important governance mechanism linking environmental, social, ethical and stakeholder considerations to board oversight. The role of the SEC is that of oversight and reporting on organisational ethics, responsible corporate citizenship, sustainable development and stakeholder relationships, among other responsibilities.
The IoDSA SEC Forum has cautioned against treating the SEC merely as a compliance structure. The committee is well placed to support the board by moving from a compliance position to one of active strategic contribution, helping to ensure that the board is not only informed about sustainability matters, but actively engaged with them.
King V does not prescribe a single committee architecture for sustainability oversight. The governing body remains accountable and should determine the most appropriate structure for its organisation, whether through the SEC, audit and risk committee, remuneration committee or other board committees. Sustainability oversight is often shared among committees, making composition and reporting critical to avoid duplication and ensure information sharing.
Building the architecture to support sustainability
There is no single, correct governance model. Boards that successfully discharge their sustainability responsibilities give their chosen structure a clear mandate, adequate delegated authority, direct access to the full board and a demonstrable line of sight into how sustainability considerations reach strategic decision-making and not only compliance reporting.
Structure alone does not deliver outcomes. Where boards fall short is not in the adoption of these frameworks and structures, but rather how they translate it into practice. A framework referenced in a policy document but absent from board agendas, resourcing decisions and performance scorecards has been adopted in name only.
A committee that only signs off reports twice a year is discharging a duty. A committee that shapes management’s questions between meetings is truly exercising governance.
Sustainability oversight should move from fragmented initiatives to a coherent governance system. Boards should ask whether sustainability considerations are built into the strategy cycle, risk appetite, business planning, capital allocation, remuneration, stakeholder engagement, data controls and assurance plans.
From oversight to strategic contribution
Organisations that move from compliance-driven oversight to more active sustainability governance usually invest in three areas:
- Board capability – embedding sustainability literacy and related competencies as part of their overall board composition, induction and director development processes.
- Quality information – ensuring reliable and consistent sustainability data and reporting from management to enable sound strategic decisions and withstand external disclosure scrutiny.
- Escalation protocols – establishing a clear path for material sustainability matters to move from operational teams to committee agendas and, where appropriate, to the full board.
These capabilities improve both reporting and decision-making. Better information strengthens capital allocation, resilience planning and risk management, including how the organisation responds to climate, nature, workforce, social and stakeholder risks. It can also support more informed oversight of executive performance, including consideration of sustainability and financial outcomes where appropriate.
Why this matters
Sustainability is evolving from what was once viewed primarily as a compliance requirement into a broader set of value-creation and protection. For boards, this means asking whether sustainability considerations are visible in strategy, risk appetite, capital allocation, stakeholder engagement, reporting and assurance.
This is not about asking boards to become environmental scientists or sustainability specialists. It is about ensuring that the organisation understands the systems and capitals on which it depends and the impacts it has on those systems. Healthy economies, communities, workforces and ecosystems are not separate from business success − they are fundamental to it.
Ultimately, sustainability is not a separate governance agenda. It is one of the lenses through which boards discharge their responsibility to create and preserve value over time. King V positions performance and value creation as one of the outcomes of effective governance, integrated thinking and responsible leadership.
The challenge for boards is therefore not whether sustainability should be governed separately, but whether sustainability considerations are sufficiently embedded in how the organisation thinks, decides, acts and reports.
