This will go a long way in supporting their expanded oversight responsibilities. They may also want to establish a special committee for ESG, and consult with subject matter specialists, to ensure core issues are identified, addressed and benchmarked against industry or international standards, if necessary.
Being “woke” where environmental and social issues are concerned, is no longer considered altruistic in the corporate context. It has become a key responsibility for Boards and management; there is a growing need to engage more concertedly with stakeholders to understand their perspectives of ESG, and what they perceive as effective management of ESG-related issues. Boards need to constantly review their effectiveness in addressing ESG risk, and should work with management to identify which ESG issues will impact the business most significantly. Risks and opportunities in these areas should be integrated into the formulation of strategies and operations.
Boards should have regular briefings on these matters as part of the Board’s role in strategic planning. Management will have to identify emerging ESG risks that could negatively impact the firm’s value in the long term and discuss how to mitigate them. While management works at supplying the necessary information, the Board must continue to look at ways of empowering them to ensure that ESG will remain part of corporate strategy, and be integrated into the roles and responsibilities of management and the Board of Directors.
Why should this be a consideration? ESG issues are long-term; organisations need Board members who are forward-thinking and focused on the next challenge. One way of managing ESG issues is to continuously add to the talent and skill sets of both Board and management; the tone at the top can be the difference between driving the company forward and lagging behind the competition. The pressure on companies – and by extension, Boards – to perform, is relentless. Stakeholder expectations increase by the day, in parallel with regulatory restrictions and greater public scrutiny. Companies that broaden their horizons on ESG matters now, and incorporate these into their long-term strategies, will be ideally positioned to continue maintaining and creating value into the future.
8 The IERP® Monthly Newsletter September - November 2021