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Sustainability: From strategic objective to compliance operation

Are you feeling responsible for picking up the pieces of your compliance operation in the aftermath of the sustainability bubble? If so, you’re not alone. As organizational America rallied behind the commitment to save the planet while boosting bottom lines, we saw a sea-change in corporate strategies

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across the world. Unfortunately, the fad quickly faded, and within three years sustainability ebbed and left a detritus of rules and regulations for the compliance department.

John Weathington

Corporate strategies shift as the environment and conditions that affect the company change. But when it comes to compliance -- especially with government interests like those related to sustainability -- an unfavorable offset happens. The government is not as nimble as a private-sector company. When the company adapts to changes in the economy but the government does not, all that’s left are rules and regulations. This is unfortunate for the compliance department, as the responsibility to comply remains, without the resources allocated to support it. The compliance departments that have survived the recent shift have taught us some valuable lessons.

The first is to closely monitor compliance operation conditions that affect corporate strategy. Compliance should involve more than just satisfying outside agencies -- it should play a vital role in supporting your company’s strategic objectives. This illustrates the fundamental relationship among governance, risk and compliance: Governance is put in place to ensure that your corporate strategy is followed; risks are uncertain events that may compromise your strategic objectives; and compliance is how we mitigate that risk.

When compliance is directly related to a key strategic objective (like sustainability), it’s important to put a process in place to monitor the conditions that affect the company’s strategy. Remember, sustainability did not fall out of favor overnight. As cost pressures mounted in the wake of the economic meltdown, companies were forced to make concessions around some of the expensive, government-advocated green alternatives. When peer pressure meets profit pressure, it doesn’t take an economist to guess the outcome.

The second lesson learned is to constantly balance resources with operational capacity. When resources become scarce, operations must be renegotiated with executive management. It’s too easy for executives to shift resources away from sustainability under the assumption that there will be no impact on compliance operations. I’ve seen many compliance officers bypass a tremendous negotiating opportunity because they feel pressured by the situation and assume that they must accommodate executive management.

The final lesson is that agility matters because compliance conditions are never stable. Rules are constantly being reinterpreted, new protests drive new regulations, and corporate strategies shift. As priorities shift, so must the compliance department’s tolerances. For example, the tolerance for greenhouse gas emissions for a particular organization may be considerably less stringent than those mandated by the Environmental Protection Agency.

It’s important that your compliance operation can support these shifts. Policies and process will need to be adjusted to line up with the current state of requirements. The agile compliance department should be prepared, and with proper adaptation of resources the impact on compliance operations should be minimal.

The evolution of sustainability will continue to oscillate between a strategic objective and a section of compliance. With the right focus, measures to ensure sustainability can gradually decrease in cost, and a wise company will strategically embrace it for competitive reasons. This has implications for the compliance department: Do not overlook the opportunity to learn from the three lessons about compliance being strategically oriented toward sustainability. Continue to monitor strategic conditions, balance resources and stay flexible to maintain the relationship between sustainability and compliance.

John Weathington is president and CEO of Excellent Management Systems Inc., a San Francisco-based management consultancy. Write to him at editor@searchcio-midmarket.com.

This was first published in February 2012

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