Sustainable long-term value creation: New finance focus for boards of directors

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Abstract

The major research question of this paper is how boards of directors’ practices and performance can facilitate the new finance focus on sustainable, long-term value creation. This new finance focus presents opportunities to strengthen corporate performance which enhances the gatekeeper role of boards of directors in helping both shareholders and stakeholders. The following topics are discussed and analyzed in this paper: potential examples, strategic analysis, sustainability analysis, and the circular economy. We discovered several guiding principles based on previous literature, regulatory proposals, and industry practices. Effective boards of directors need to be engaged in sustainable strategy formation and make sure long-term sustainable value creation continues to develop and does not erode. They need to have relevant industry knowledge, diverse expertise, and a proclivity for thinking independently in both good times and bad times, such as the coronavirus pandemic. They also need to develop a clear understanding of sustainable business strategies and how long-term value is created and driven through innovation and the deployment of resources. In addition, we find that boards can assess and monitor ways to measure and manage long-term value creators and drivers and encourage their companies to become involved in the circular economy with its $4.5 trillion investment opportunities. Future research could use case studies and board interviews to investigate boards of directors’ practices and performance, concerning how boards have helped develop strategies and procedures to facilitate this new finance focus on long-term sustainable value creation.

Keywords: New Finance, Circular Economy, Sustainability, Board Practices, Corporate Governance

Authors’ individual contribution: Conceptualization – H.G.; Methodology – H.G. and T.X.; Resources – M.C.; Writing – Original Draft – H.G.; Writing – Review & Editing – M.C. and T.X.; Visualization – T.X.; Funding Acquisition – M.C.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C3, G30

Received: 23.10.2020
Accepted: 18.01.2021
Published online: 20.01.2021

How to cite this paper: Grove, H., Clouse, M., & Xu, T. (2021). Sustainable long-term value creation: New finance focus for boards of directors. Corporate Governance and Sustainability Review, 5(1), 22-30. https://doi.org/10.22495/cgsrv5i1p3