ESG the top priority for 2021

In February, governance professionals polled by the Institute and The Core Partnership placed ESG at the top of their list of priorities for 2021. Sara Drake looks at some of the issues facing governance professionals.

In February, governance professionals polled by the Institute and The Core Partnership placed ESG at the top of their list of priorities for 2021. This comes as little surprise given the increased prominence of environmental, social and governance issues in recent years, not to mention the additional emphasis that the pandemic has given to many of these issues.

Activists like Greta Thunberg and the group Extinction Rebellion have brought the issue of climate change to the attention of a new generation of eco-warriors, but environmental awareness has been growing for years. Environmental activist Swampy became famous in the 1990s after spending a week in a tunnel aiming to stop the expansion of the A30 in Fairmile, Devon, and tunnelling continues to be a tactic employed by activists. More recently, HS2 protestors dug secret tunnels under Euston Square Gardens, which they claim is under threat because of the planned high-speed railway.

Climate change is set to take centre stage this autumn with COP26 taking place in Glasgow in November. COP26 president Alok Sharma has outlined five priority actions areas for COP26:

  1. Adaptation and resilience: ‘Helping people, economies and the environment adapt and prepare for the impacts of climate change.’
  2. Nature: ‘Safeguarding ecosystems, protecting natural habitats and keeping carbon out of the atmosphere.’
  3. Energy transition: ‘Seizing the massive opportunities of cheaper renewables and storage.’
  4. Accelerating the move to zero-carbon road transport: ‘By 2040, over half of new car sales worldwide are projected to be electric.’
  5. Finance: ‘We need to unleash the finance which will make all of this possible and power the shift to a zero-carbon economy.’

Assuming the COVID-19 pandemic is under control by then, it will be the largest international conference the UK has ever held, with upwards of 30,000 people in the city, representing over 200 countries, businesses, NGOs, faith groups and more. There is an expectation that governance can help. Therefore, there is plenty for governance professionals to think about in terms of how best to help their organisation achieve the Government’s green agenda.  Every organisation will want to have a conversation about what climate changes mean for them, and the Institute will be producing a resource that should support them in this.

In terms of the ‘S’ in ESG, the impact of the pandemic on society has been huge. More than  2.5 million people have lost their lives globally, and the economic impact has created joblessness equivalent to the Great Depression. On top of this, we have seen the global outcry over systemic racism and political instability, which has shaken people’s faith in government. Many have begun to question which information sources they can truly trust.

There is a big opportunity for business here. The most recent Edelman Trust Barometer shows that business is now seen as the only institution which is both competent and ethical. Business may be invited to fill the void left by government, with CEOs now expected to step in when government doesn’t fix societal problems. 86% of respondents to this year’s barometer want to see CEOs to speak out on such issues as the impact of the pandemic, job automation, societal issues and local community issues. An additional 68% believe that CEOs should take the lead on change rather than wait for government to impose change.

We also see an increase in new areas of focus which people would like business to address. The top trust-building action for business now is to ensure that reliable, trustworthy information goes out to their employees and, by extension, the community. Some 53% of respondents believe that when the news media is absent, businesses have a responsibility to fill the information void.

The UK Government’s levelling up agenda is the most obvious demonstration of the political will to create a fairer society. Organisations have an opportunity to think about the part they wish to play in this.

In terms of governance, boards are increasingly having to focus on their organisation’s carbon footprint, supply chains, corporate purposes, diversity, equality and sector-specific matters. The lack of global standards surrounding these issues makes it harder for organisations to develop their strategies and benchmark their success. On 21-22 April, therefore, we are running an ESG Summit to address the key issues governance professionals face in developing, implementing and analysing their ESG strategies. As the global economy recovers from the events of the last year, the economic benefits which sustainable organisations can bring will be significant.

Sara Drake, Chief Executive, The Chartered Governance Institute UK & Ireland

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