Why Governance and Policy are Important, Even for Small Businesses
10 December 2024
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Photo credit: The Sustainable Restaurant Association (TSRA)
IN THIS ARTICLE, WE EXPLORE WHY CORPORATE GOVERNANCE AND ROBUST POLICIES ARE JUST AS IMPORTANT FOR INDEPENDENT RESTAURANTS AND OTHER SMALL FOOD BUSINESSES AS THEY ARE FOR LARGE HOSPITALITY GROUPS.
What is corporate governance and why is it important?
Also known as the ‘G’ in ESG (Environmental, Social and Governance), corporate governance is a term for the rules and processes used to direct and manage a company. Good governance is about creating a culture of transparency, accountability and integrity as a matter of course; this ensures that your business operates in an ethical and responsible manner; manages risk effectively; acts in the interests of staff; and delivers value to stakeholders. Governance builds strong foundations and allows businesses to operate efficiently as well as ethically.
What are policies and why are they important?
A policy is the link between your company’s overall values and its day-to-day operations. Policies can (and should!) cover both social and environmental considerations, from how your employees are treated to how your business manages its impact on the planet. Robust policies inform daily business activities and provide invaluable, pre-considered guidance on how to handle issues as they arise, while also protecting organisations from legal liability.
How are governance and policies tied to sustainability?
As the climate and biodiversity crises worsen, customers grow ever more concerned about sustainability and environmental legislation tightens across the globe, it’s never been more important for businesses to put written commitments in place. Building sustainability into your governance and policies solidifies your commitment to operating in ways that are environmentally restorative and socially responsible.
While environmental policies might be first to mind when you think of sustainability, social impact carries just as much weight. It matters how restaurants and other food businesses interact with their employees, customers, communities and suppliers; having policies in place to steer this is important.
Why do governance and policies matter for small businesses?
It may seem like your small business doesn’t have the time or the need for structured governance and formal policies — but these can steer your sustainability initiatives while also supporting continued success in a number of ways.
- Reduce risk. Small businesses are more vulnerable to the impacts of risk – legislative, reputational and environmental. Effective governance helps to reduce or even eliminate risk.
- Enhanced reputation. Good corporate governance can help your business to build a strong reputation for ethical and responsible business practices, which are increasingly important to potential customers and employees. What’s more, investors are more likely to take an interest in companies with strong corporate governance practices, viewing them as less risky and more likely to succeed.
- Increase transparency and accountability. By keeping board members and other stakeholders accountable, governance lays a foundation for continued success and growth – particularly important for small businesses operating in an extremely difficult industry and at an especially challenging time.
- Formalise your sustainability commitments. Having written rules for how your business tackles sustainability helps you meet legal requirements and avoid greenwashing. Embedding these commitments into operations can also have a positive effect on your bottom line, including reduced costs and increased efficiencies.
- Improve recruitment and retention. When employees feel that the company is being run ethically and transparently, they are more likely to stay for the long haul. Furthermore, policies support your team by providing a structured approach to resolving workplace conflicts and grievances promptly and fairly, creating a positive work environment that runs smoothly. With recruitment and retention ongoing —often costly — problems across the hospitality sector, policies that keep staff safe, supported and happy can make a big difference to small businesses.
- Streamline decision-making. Small hospitality businesses are subject to an enormous amount of pressure on a daily basis, and don’t often have the capacity to deal with unexpected issues that arise. Having thorough policies already in place provides a framework for decision-making that can help you navigate challenges more easily, no matter how pressured the time of year or how busy the shift.
- Guide crisis management. This is also true when it comes to crisis control. Thorough policies and procedures can help to avoid crises happening in the first place and work to limit potential damage when they do occur.
What does good governance look like?
Here are some questions to ask around corporate governance in your own business.
- Is your board inclusive, with diverse voices present — including different backgrounds, skill sets and experience— and are these voices equally encouraged to share their views
- Are board members active and engaged in how the business is being managed
- Are the activities of the board captured and shared with relevant parties in a transparent manner?
- Do your directors demonstrate strong leadership when it comes to operating in ethical and responsible ways?
- Is your business actively working towards environmental and social best practices?
- Is sustainability a key consideration in all long-term, strategic planning?
- Can you demonstrate clear compliance with all regulatory and reporting requirements, including where sustainability is concerned?
- Are you proactive around ESG reporting and disclosures, even when not legally required?
- Are you measuring progress in these areas?
What makes a good policy?
In hospitality businesses, policies can cover topics like:
- HR and internal processes (think DEI, fair recruitment processes, grievance management, dismissal procedures, preventing bullying and sexual harassment, training and development, etc.)
- Environmental impact (for example, how your business manages and reduces food waste/water use/carbon emissions, rules around pollution and use of chemicals, recycling guidelines, etc.)
- Social impact (for example, commitments to serving dishes that support public health or around how your business interacts with/gives back to its community, etc.)
- Procurement standards (for example, keeping your supply chain clean of human rights abuses or deforestation, buying only higher welfare meat, sourcing a specified volume of ingredients from within a particular radius, etc.).
Every business is different, and because of this, your organisation’s policies will need to be tailored specifically to your own situation. However, regardless of its subject, a good policy will have a few key inclusions. It should:
- identify the issues in scope,
- explain how the business will approach these,
- define what success will look like,
- set clear, measurable targets,
- outline how the policy will be enforced and who is responsible, and
- state how often the policy will be reviewed.
Source: The Sustainable Restaurant Association
