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The modern board’s legacy may be defined as much by community impact as by return on capital.
From social licence to long-term risk, directors are confronting a new reality: value creation extends well beyond the balance sheet.
Directors who think beyond the numbers are shaping institutions built to endure.
In an era of rising scrutiny and shifting social licence, the question for directors is no longer simply what they earned, but what they enabled. Today’s directors are being judged on how they balance profit with purpose — and whether their decisions leave organisations and communities stronger for the long term.
Laurence Marshbaum OAM thinks back to pitching his former employer, Australian Retirement Trust (ART), for cornerstone funding to launch his trailblazing social purpose portfolio management firm. He took nothing for granted.
“No-one had created one of these entities focused on the institutional market before,” says Marshbaum of his brainchild, Community Capital, designed to deliver investors strong returns while delivering its own management fees to organisations creating measurable community impact.
For ART’s board and investment committee, the decision required careful scrutiny.
“The best financial interest test governs everything they do,” he says. “There were [governance] risks associated with supporting something in its infancy. It wasn’t an easy decision.”
Yet Marshbaum sensed a broader shift underway. Super funds were facing pressure from their boards and members to earn their social licence — a feeling now familiar to many corporates. “They need to see themselves as more than just good corporate citizens, but as citizens of a community, of a country and an ecosystem.”
ART ultimately “leaned in” to the venture, says Marshbaum, as did Barrenjoey, QIC and Minderoo.
“That decision at a board level has unlocked a material amount of money, which will be around in perpetuity to fund social innovation.”
Since 2022, Community Capital’s “win-win” model has proven itself by raising more than $1 billion, enabling $9 million in multi-year grants for 11 organisations, making an extraordinary, demonstrated impact in Australian communities.
The lesson for directors is clear — decisions taken in the boardroom can shape long-term community outcomes as well as financial returns.
From licence to leadership
Integrating social impact into governance is no longer peripheral. Community expectations have changed, says Darren Fittler, founder and lead partner of Gilbert + Tobin’s Charities and Not-For-Profit group.
“It’s more than just the pub test [or even] social licence to operate. It’s genuinely taking into consideration what community expectations might be, [not just] shareholder primacy, where we want to make lots and lots of money and deliver money to our shareholders and the job’s done.”
Fittler points to Woolworths’ abandoned plan to open a Dan Murphy’s liquor outlet in Darwin. Following community outcry, the board commissioned what would be a damning independent review that concluded that commercial considerations had taken precedence over public interest concerns. The company reversed course.
“The long-term sustainability of a company requires the long view, and that long view needs to be driven by something more than just making money,” says Fittler. “In that regard, the for-profit world has quite a bit to learn.”
Shareholder activism, particularly around environmental issues, is already reshaping board agendas. “That accountability will increasingly extend to social issues,” he says.
Xero chair David Thodey AO FAICD warns it already has. “Over the past decade, expectations on boards have shifted to a more integrated view of stakeholder value, social licence and long-term risk. Customers, employees and investors expect boards to understand how sustainability and social impact affect strategy, culture and financial performance.”
Organisations treating social impact seriously are better positioned to attract talent, build trust and manage risk, he adds.
“Directors who view social impact as peripheral may be missing material drivers of value and risk. Social licence, workforce inclusion and community relationships show up in everything from brand strength to operating resilience. Treating those as a nice-to-have is no longer an option.”
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The expanding “S” in ESG
Mandatory climate-related financial disclosures, introduced in 2025, have sharpened board focus on environmental risk in sustainability reporting — the “E” in environmental, social and governance (ESG) performance. But what of the “S”?
“That [regulatory shift] had a big effect at both executive and director level in resetting the focus on climate risk and opportunity,” says Melissa Edwards MAICD, of the UNSW Centre for Social Impact.
Concerned that attention to environmental reporting might eclipse social considerations, Edwards and colleagues analysed social disclosures among ASX 100 companies.
“We were surprised to see the ‘S’ disclosures were still relatively frequently reported,” despite being, for now, voluntary, she says.
However, most reporting centred on internal initiatives such as diversity programs, employee giving and training. There is significantly less disclosure across supply chains (Scope 2) and broader value chains (Scope 3), where potential risk and impact may be greater. Related revisions to the Modern Slavery Act 2018, and internationally, frameworks such as the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) are seeking to develop more structured guidance.
For directors, Edwards suggests three priorities — clarity, resourcing and measurement.
“Boards should ensure social objectives are clearly defined and aligned to core business, adequately resourced and supported by robust evidence-based metrics.”
Embedding impact at board level
Xero is well advanced in embedding impact at the board level, according to Thodey. “From a governance perspective, we treat sustainability with the same discipline we apply to other strategic initiatives,” he says.
The Xero board receives biannual ESG performance updates and approves Xero’s external sustainability targets and disclosures. Climate-related and broader sustainability risks, including modern slavery, get formally reviewed. The company maintains a climate risk register and conducts an annual materiality assessment.
Resourcing is explicit. Xero For Good — encompassing the company’s financial confidence education initiatives, its Regional Giving Circle, Community Connect volunteering program, and social procurement strategy — operates with a dedicated budget and clear alignment to board-approved strategy.
“When boards see sustainability and social impact data side-by-side with financial, customer and product metrics, it becomes part of strategic discussions, rather than an add-on,” notes Thodey.
Drawing on decades of board experience, he frames the legacy question succinctly — directors should aim to demonstrate progress on customer and stakeholder impact, ethical leadership, diversity and inclusion, climate and community impact, and, of course, shareholder value creation.
“If people say [directors] have demonstrated some of these characteristics, then we hopefully have left the organisation in a better place,” he says.
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