For many, the term ESG (environmental, social, governance), conjures notions of investors chasing feel-good stories of sustainability, diversity, and ethics. But given the heightened interests from various stakeholders, corporate directors need to know that ESG is much more. Far from being just window dressing, there are real risks at play when it comes to ESG issues, and even more opportunities to be seized. The COVID-19 pandemic has only served to make this more evident.
ESG issues are increasingly seen by shareholders as a window into the future, with a clear hierarchy 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, on the other hand, ignore the topic as a whole or still think of ESG as a check-the-box exercise grounded in philanthropic activities.
In this respect, the tone at the top can make the difference between a company landing at the front or back of the pack. Understanding why the board of directors should oversee ESG issues is the first step. But as with many things, the real work is in the details – so how can boards fulfill their critical role in ESG oversight? We outline 4 key tasks:
