Governance, the most often overlooked of the ESG factors, is in fact essential to the success of the other two. “Without solid governance, it is difficult to define and implement effective environmental and social strategies. If a company is poorly managed, even financial investors tend to be wary: they wonder whether the company is truly capable of delivering on its announced sustainability commitments.” This is the opinion of Rossella Sobrero, a lecturer at the Università Cattolica in Milan, as well as president of Koinètica and coordinator of the CSR and Social Innovation Fair, whom we interviewed.

Which are the most significant aspects of good governance?

The way we understand business management and relationships is changing. People in senior roles must not limit themselves to simply supervising or issuing directives; they must also engage with people. A good leader knows how to motivate employees by taking a personal stand on social and environmental issues. When entrepreneurs and managers stand up for their beliefs, demonstrating consistent and credible behaviour, they strengthen the organisation’s image and enhance what we now call relational capital: relationships built on trust are an increasingly important factor for corporate credibility and reputation.

When we speak of governance, we often think more of internal decision-making processes than of external stakeholders.

While internal processes are essential, they are not enough. Effective, open and transparent governance also relies on stakeholder engagement: continuous dialogue with stakeholders, with the aim of incorporating suggestions and different perspectives and, where necessary, adjusting corporate strategies.

You advocate for the concept of “transformative sustainability”: what does that mean?

Projects and investments should lead to real change; otherwise, sustainability risks remaining nothing more than a mere statement. They should tangibly improve people’s quality of life and the environment. This applies to the well-being of employees, relationships with local communities, and the management of the supply chain.

What is the difference between this and “sustainable success”?

Sustainable success is the ability to last over time, thanks to credible and consistent choices, with a view to “reasonable consistency” – a business must, of course, generate profit, but it can strike a balance between financial performance, environmental impact and social responsibility. Smart governance can achieve this, creating long-term value for both the company and society. 

Is there a risk of “governance washing” in terms of communication?

Communication must simply tell the truth. When used effectively, it can support a company’s growth: it strengthens employees’ sense of belonging and improves relations with stakeholders. Today, for example, many organisations struggle to attract talent, because there are problems not only with communication but also with governance: young people are looking for companies that can convey values and ensure a good work-life balance. If there is consistency between what is said and what is done, the risk of the so-called washing decreases.

Does being transparent also mean communicating difficulties or unmet targets?

Companies aren’t perfect and don’t always manage to achieve all their goals: it’s important to share what hasn’t worked, perhaps explaining how they intend to take action to improve. Being transparent means acknowledging that difficulties may arise, sometimes due to external factors.

What are the differences between large companies and SMEs in this process?

It is difficult to generalise. While some large companies still struggle with communication, many small and medium-sized enterprises manage to be highly credible, particularly when the entrepreneur is directly involved and convinced of the importance of these issues. SMEs often have a more direct relationship with the local area and communities, and this can strengthen the bond of trust.

Is trust a key concept in governance?

Absolutely. Relational capital is based precisely on trust. If a company communicates untrue or partial information, it risks undermining a relationship built up over time. That is why it is better to communicate less, but to communicate better.

Governance also involves monitoring the supply chain, which will become increasingly important in the coming years.

Many recent scandals have arisen precisely because of a lack of oversight over suppliers. A company may have very rigorous internal processes, but if it fails to monitor what is happening within its supply chain, it still risks reputational and operational problems. Effective governance must also address this issue, combining monitoring and support.

In what way?

On one side, by establishing clear rules: anyone who does not respect fundamental principles – from human rights to decarbonisation commitments – may be removed from the supplier register. On the other side, by helping partners to improve through training, tools and shared development pathways. This creates genuine synergy within the supply chain.

Cover: Rossella Sobrero