Environmental, social and governance (ESG) issues are increasingly seen by shareholders as a window into the future. And a clear hierarchy is emerging. Leading companies view ESG issues as a business imperative. They manage risks while capitalizing on opportunities, including sharing their story and vision for the future, setting themselves up for long-term success and value creation in the process. Laggards still think of ESG as a check-the-box exercise grounded in philanthropic activities.
The tone at the top can make the difference between a company landing at the front or back of the pack. But as our 2020 Annual Corporate Directors Survey found, just under half of directors (45%) tell us that ESG issues are regularly a part of their board’s agenda. There is significant room for improvement.
A company’s ESG strategy spans a wide swath of the organization, requiring multiple functions to work together towards common goals and reporting that tie deeply and directly to the overall business strategy. Many companies are just beginning to pull the pieces together and close oversight from the board is essential in crafting a compelling ESG story and bringing it to life.
Here are some considerations for the full board and its committees on how to address ESG oversight:
Accountability: Are the ESG goals and milestones effectively integrated into executive compensation plans?
Talent and culture: How is management organized to execute the ESG strategy? Are the right people and processes in place? Does the company have a culture which embraces ESG efforts?
