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Interesting Lessons from the King IV Report for Leaders of Organizations

The King Report (currently King IV) on corporate governance, is widely accepted as the leading guidance standard on how companies should be lead, and how they should be conducting their business. How does this tie in with the requirements of the ISO management system standards? We will try to establish links to the three basic standards, ISO 9001:2015 (Quality), ISO 14001:2015 (Environmental) and ISO 45001: 2018 (Health and Safety). This is not to say that there is no link to other ISO management system standards, but let’s keep it simple.

I have paraphrased and, in some cases, used the wording of King IV for the sake of simplicity.


KING IV focuses on making organizations sustainable in the long term. If someone wants to invest money in an organization, and, for many, if they are going to support an organization, they want to know that it is going to be sustainable over the long term, the next 20 to 30 years, and even longer, while it is conducting its business in a responsible manner. King IV bases sustainability on the “triple context” of sustainability, that is economic (ISO 9001), environmental (ISO 14001) and social sustainability (which includes ISO 45001).


This means that governing bodies in organizations (leadership) have the challenge of steering the organization to create value in s sustainable manner, making more with less to meet the needs of a growing population and the reality of dwindling natural resources.


To help organizations to achieve this, King IV cites 6 principles to be applied to achieve good corporate governance:

  • Ethical leadership

  • Corporate citizenship

  • Sustainable development

  • Stakeholder inclusivity

  • Integrated thinking

  • Integrated reporting

Ethical leadership: Ethical leadership is about integrity, competence, responsibility, accountability, fairness and transparency. It involves the anticipation and prevention of negative consequences of the organization’s activities and outputs on the economy, society and the environment. As can be seen, clearly linked to sustainability, and thus the 3 basic ISO standards.


Corporate citizenship: The organization is an integral part of society. It has corporate citizen status under the law. This status confers the rights, obligations and responsibilities on organizations towards society and the natural environment on which society depends for their continued welfare. Therefore the standards are very clear on the requirement of legal compliance, which includes the constitution of the country.


Sustainable development: Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their needs. It is a primary ethical and economic imperative of leadership in organizations. Sustainable development is specifically mentioned in the introductions of both ISO 9001 and ISO 14001.


Stakeholder inclusivity: Organizations and their stakeholders (interested parties) are interdependent. There is a relationship between the organization and its stakeholders, and the ability of the organization to create value for itself depends on its ability to create value for others. The organization needs to tune into the opportunities and challenges posed by the triple context in which it operates (context of the organization, clause 4 in all three the standards) by having regard to the needs, interests and expectations of material stakeholders or interested parties (clause 4.2 in all three the standards).


Integrated thinking: Integrated thinking is taking into account the connectivity and interdependencies between a range factors (clause 4.1 and 4.2 of all three the standards, understanding the organization and its context and understanding the needs and expectations of interested parties) that affect the organization’s ability to create value over time.


Integrated reporting: Integrated reporting is an outcome of integrated thinking. Reports issued by the organization must enable stakeholders or interested to make informed assessments of the organization’s performance. And its short, medium and long terms prospects (a requirement for JSE listed corporates).


Critical success factors and key performance indicators are not limited to financial performance only (ISO 9001).It includes social aspects (included in ISO 45001 and SA 8000) and environmental performance (ISO 14001). Reporting must be comprehensive and cover all the areas of the triple context.


The KING IV principles apply well to the implementation of an integrated management system (quality, environmental and health and safety). One can add to this SA 8000. The SA 8000 Standard is based on internationally recognized standards of decent work, including the Universal Declaration of Human Rights, ILO conventions, and national laws. SA 8000 applies a management-systems approach to social performance and emphasizes continual improvement—not checklist-style auditing. The context of the organization (clause 4 in all the new ISO management system standards) involves the triple context of sustainability. There is a lot of overlapping where one element of sustainability impacts or can be impacted by other parts. This goes as far as incident management, where and environmental incident could affect health and safety of people and society, and certainly will impact on financial performance (quality management).


I believe that the application of these principles of good corporate governance is vital in our day and times. We have to now concentrate on sustainability. There are many organizations (and governments) who are not leading ethically, who sees themselves as above the law, or simply ignores the statutes and regulations applicable to them, who thinks short term in terms of economic performance, ignoring the requirement for sustainability, who care only about themselves, and have no or very little regard for other stakeholders (including, in some countries the citizens of those countries that they have to govern), who have little regard for stakeholder inclusivity, unless it is on their terms, who operate in silos, and ignores integrated thinking, and who report only on financial performance, and then always very accurately. Even government tend to report in such a way that they would “look good”, and tend not to report in an integrated manner, since it may harm the “reputation” of the government or organization.


Let me know your thoughts on this topic. You can e-mail me at koosgouws10@gmail.com.


Feel free to visit our website at www.sheqmanagementsystem.co.za, or, alternatively, www.sheq-management-systems.webnode.com.

I hope that this information is helpful!


Regards

Koos

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