For organisations still coming to terms with the lasting effect of the pandemic on business arrangements, the inclusion of ESG issues within their strategic discussions and future developments is likely to make them better placed to deal with future business disruptors. Boards that act now in framing their ESG issues will be ahead of the curve in terms of the effective delivery of new products and services in established and new formats and ongoing sustainability. They will also likely be better positioned to attract and retain key stakeholder groups (investors, funders, staff, volunteers, customers, clients, donors, suppliers and supporters) as society becomes more knowledgeable and demanding in a range of ESG areas of interest.
From a management perspective, looking at an organisation’s activities through the ESG lens can give a profound insight and impact on the way an organisation operates.
Organisations committed to developing ESG monitoring and reporting are therefore likely to be better placed to deal with issues arising from within the organisation and externally and minimise the adverse impact on the organisation. The executive team should be closely involved in ESG matters and reporting to demonstrate the organisation’s commitment.
Other staff should be included in a ‘grassroots to boardroom’ approach, which incorporates input from different departments and across locations (where relevant) to ensure each perspective has an opportunity to contribute to the ESG discussion and delivery of resilience sustainable goals. There is a key role for governance professionals to act as a bridge between the different parts of the organisation, and its stakeholders, to develop a consistent and convincing narrative of why ESG is intrinsic to good governance.
As with many aspects of good governance, an individual organisation’s approach is likely to be tempered by available resources and what is proportionate to the size and complexity of the organisation. A simple approach promoted by Chapter Zero, and adapted for a broader ESG perspective, includes the following steps:
The role of the governance professional in introducing and supporting the board with these five stages is likely to be key to the success of any agreed outcomes. The governance professional is therefore likely to have a role in:
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Compliance and reporting |
s172 (stakeholder) considerations |
Strategy |
Risk |
Culture |
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Identifying the current legal (minimum) requirements of the board/organisation |
Ensuring board papers and the minutes reflect the requirements of s172 (or other stakeholder accountability or other considerations) |
Ensuring board papers align strategy and any ESG activities, with a clear understanding of where recommendations support or diverge with public commitments to ESG issues |
Ensuring board papers align strategy and any ESG-related risks, with a clear understanding of where recommendations support or diverge with public commitments to tackling a specific ESG issue |
Introducing and supporting individual and collective board development opportunities to better understand the potential impact of relevant ESG issues on the organisation’s activities and likely success |
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Identifying and recommending good practice in a specific sector/activity to develop a ‘best in class’ approach |
Identifying/producing a stakeholder map for the organisation |
Facilitating strategic away days that include relevant ESG scenario planning and disseminating the output for further board (and management) consideration |
Supporting the recognition of different risks (including the risk of not doing something) in the risk register and its impact on the organisation’s ability to deliver its strategy |
Introducing specific speakers/presentations on ESG issues to board meetings (e.g. presentations from workers on the front line or the perspective of institutional investors) |
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Delivering or procuring board development opportunities in the regulatory issues |
Facilitating board discussions as to prioritising those stakeholders in terms of actions identified and agreed (risk, investment, staffing, customers, suppliers etc.) |
Supporting board papers which draw upon sector or economy initiatives that represent best in class for a specific relevant activity etc. to promote discussion and development |
Identifying areas where relevant ESG-related risks could be countered, managed or where the organisation will simply have to live with the risk. These may impact insurance, staffing and reputational risks. |
Ensuring board policies match stated organisational aims on ESG-related activities and promoting the relevant behaviours to align with those policies (e.g. travel policies, EDI positive recruitment practices, pay ratios) |
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Providing support to individual board members to improve understanding and adherence |
Facilitating proactive and constructive discussions with key investors, shareholders and stakeholders |
Providing board support to embed stakeholder engagement into broader strategic discussions |
Encouraging the board to review relevant ESG risks from the front line to the boardroom, via the share market or other key audiences |
Remaining alert to any issues or actions which could publicly (or privately) challenge the organisation’s stated culture, values or ethics (being the conscience of the organisation) |
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Promoting consistency of organisational reporting on these, and related matters |
Ensuring the board is regularly appraised of key developments in shareholder/stakeholder sentiments (e.g. fundholder concerns, staff surveys, customer focus groups) |
Analysing and reporting on the governance (and other) benefits of adopting a specific approach or activity |
Reviewing and amending the governance architecture to ensure all relevant policies and procedures reflect the board's agreed decisions/actions on tackling ESG |
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Forecasting future changes and requirements and helping the board to future-proof for those developments in a timely and considered manner |
Ensuring the annual report and AGM deal transparently with key shareholder/stakeholder concerns and interests |
Including aspects of the ESG strategy in the board review process and facilitating any follow-up actions |
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Reviewing and updating board policies to ensure they reflect good practice, legal requirements and the stated aims of the organisation |
Evaluating the effectiveness of the organisation’s stakeholder engagement processes and sharing good practices to drive improved shareholder/stakeholder engagement, including where the board may have acted in a way not seen as supportive by a key group |
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To help you find resources on ESG, we have put together a webpage with links to our content, including blogs, papers and relevant courses. Take a look at our ESG resource hub.
Join us for our upcoming ESG Summit, on Thursday 27 April 2023. Find out more and book your place today.
