The role of a company’s board of directors is becoming increasingly crucial in driving sustainability initiatives. It is no longer sufficient for boards to simply acknowledge the importance of ESG. They must thoroughly understand the topic and actively ensure that sustainability is integrated into business strategies and decision-making processes.

Charles Héaulmé is the President & CEO of Huhtamäki, Chair of Suominen, and a Boardman Member.

This involves taking a proactive role in guiding the company’s strategy towards long-term sustainability goals, fostering a culture of collaboration and transparency, and ensuring that the company is not simply compliant with the increasing reporting requirements but also actively integrating sustainable practices across all operations.

CSRD should not be viewed as a reporting burden

The upcoming Corporate Sustainability Reporting Directive (CSRD) will undoubtedly pose some challenges for companies, but it should not be viewed only as a reporting burden. Its purpose is to ensure that companies understand the most material issues for their business. Those adept at grasping these impacts can also uncover positive opportunities by leading with sustainability.

However, sustainability regulations are not solely about reporting. The regulatory landscape also emphasizes transparent and sustainable supply chains, recycling, product design, green claims, human rights, and more. Addressing these issues requires tight collaboration across the value chain, as no company can solve them alone.

The increasing expectations also present an exciting opportunity for companies to lead by example and contribute to a more sustainable future. Boards play a pivotal role in this. By fostering collaboration between board members, executive management, shareholders, and employees, boards can drive sustainability, operational efficiency, and innovation. Increasingly, it is seen as the board’s responsibility to ensure that holistic sustainability practices are integrated into the company’s strategy and vision, with sufficient focus and resources for action.

In the EU, we often assume that such progressive legislation is confined within our borders, but that’s not the case. Similar initiatives are taking shape around the globe, signaling a steady increase in the relevance of sustainable business practices. The United States, Asia, and other regions are gearing up to implement their own versions of sustainability legislation and regulations.

Embracing gender balance

There are many facets of sustainability, but for me personally, gender balance is an area we must continue to highlight. The EU’s recent directive for improving gender balance among directors of listed companies is likely to bring this topic to the forefront in boardrooms, given that statistics still show significant room for improvement.

The directive requires that by 2026, at least 40 percent of board positions not belonging to the executive management of European listed companies must be held by representatives of the “underrepresented sex” – primarily women. This rule will apply to listed companies employing at least 250 people. Among OMX25 companies, only 11 currently meet this criterion based on 2024 data.

To me, this is not just a regulatory requirement but a call to action. We cannot afford to ignore the talent that comes with including women in top decision-making positions. Diverse perspectives foster innovation, enhance decision-making, and ultimately contribute to better business outcomes.

Having lived and worked in various countries and continents, I have witnessed an evolution in how gender equality is considered. Some places lack diversity, while others, like Finland, naturally appreciate the benefits of diverse perspectives.

As a French citizen, I take pride in France’s progress in promoting gender diversity at the highest levels of corporate governance. France can indeed be seen as a champion of gender equality, with all the largest listed companies already achieving at least 40% representation of each gender at the board level. In Finland, the threshold is slightly lower, with women making up at least one-third of board members in major companies, which is also a strong indicator of progress. This is just one area where companies can reap business benefits by staying ahead of legislation.

Beyond compliance: the broader impact of ESG legislation

It’s crucial to view these legislative changes not as mere compliance requirements but as catalysts for substantive change. The aim is to preserve and enhance a company’s value through sustainable and inclusive practices. These regulations are designed to push companies beyond box-ticking and towards genuine, impactful action.

In conclusion, we are witnessing a significant transformation in corporate sustainability, driven by both European leadership and a global recognition of the importance of ESG principles. For boards, this shift means embracing new responsibilities that extend beyond traditional governance roles. Ensuring gender balance, overseeing comprehensive sustainability reporting, and integrating other new requirements are not just regulatory mandates. They are essential components of a forward-looking, responsible, and successful company.

Author

Charles Héaulmé serves as President & CEO of Huhtamäki since 2019. This year, he joined the board of directors in a Finnish company and was elected Chairman of the Board at Suominen in April 2024. Born in France, Charles has lived half of his life outside of his country and worked in various leadership roles across Europe, Africa, North and South America. Charles has completed Boardman’s English-language CG and Board Work in Finland training and is a Boardman Member.

Read about Boardman’s English-language membership