5 ways corporate boards can strengthen ESG strategy
Embedding enduring ESG strategy into a company’s ethos truly requires all hands on deck. Targets and claims are no longer enough as consumer and stakeholders are expecting a high level of diligence and fulfillment.
Corporate boards play a critical role in ensuring that their companies positively impact society and the environment. Environmental, Social, and Governance (ESG) strategies are becoming increasingly important for companies, and boards need to take action to ensure that their companies are addressing these issues effectively and actionably.
Here are five actions that corporate boards can take to advance ESG:
- Integrate ESG strategy into the company’s overall ethos: ESG can no longer be viewed as a company initiative or a fleeting trend, it must become a central facet of everything the organization does. We must understand that ESG is not just a checkbox we tick in order to please our stakeholders, but in reality, the concept underpins the very fabric of how profits are earned in the first place.
Boards should ingrain ESG and sustainability into the very ethos of their organizations. This means that the company’s goals, objectives, and key performance indicators should reflect its commitment to ESG issues.
A potent step to encourage this introduction is by linking CEO pay to ESG progression. For so long, shareholder returns have dominated boardroom conversations; as the climate is shifting, so must our conversations.
- Recognize that sustainability requires championed corporation: Board members need to quickly educate themselves on the science behind ESG and sustainability. Consider setting up ESG or sustainability committees to deep dive into these complex issues, much like audit, risk management, remuneration, nomination, and governance.
Additionally, a champion should be assigned within the company to be responsible for ESG issues. This will ensure that ESG issues are given the attention and resources they need.
Disclose ESG information: Corporate boards should ensure that their companies are transparent about their ESG performance. This includes disclosing information about the company’s environmental and social impact, as well as its governance practices.
Reporting frameworks such as CDP, SASB or GRI or even the Plastic Scorecard’s plastic reporting framework can provide excellent avenues to publicly disclose ESG and sustainability performance.
- Transparently engage with stakeholders: Corporate boards should engage with stakeholders, including investors, customers, and employees, to understand their concerns and expectations around ESG issues. This will help the company to identify opportunities to improve its performance and to build trust with its stakeholders.
To specifically cement this trust, board’s should take their stakeholder’s feedback and set ambitious, science-based targets. Each target should evaluate business as usual and set improvement targets with defined timelines, whether it’s for 10 years or short-term goals. Every target should be realistic and actionable, without letting perfection be the enemy of progress.
- Monitor and report ESG performance: Corporate boards should monitor and report the company’s ESG performance. This includes setting targets and measuring progress towards them. This will help the company to share the company’s ambitions internally and externally, and use that to rally the organization to align behind ESG goals.
Be transparent about initiatives and link ESG targets and strategy to company culture to get
Corporate boards alignment and action plays a critical role in advancing Environmental, Social, and Governance (ESG) issues. A company’s ESG strategy should be willing to disclose ESG information, engage with stakeholders, and monitor and report ESG strategy performance.
By taking these actions, corporate boards can ensure that their company ensures a positive impact is being facilitated for society and the environment.
Furthermore, companies will begin to recognize that ESG is more than just disclosures and compliance. By integrating ESG strategies, companies will begin to appreciate financial and non-financial benefits such as higher valuations, lower cost of capital, better customer retention, and a better employer brand.
Creating a holistic ESG strategy is not just good for our society and the environment, it can also be good for business.
Suppose your company is looking for a resource to help increase transparent sustainability resources or for advisory on launching and communicating an ESG strategy. In that case, we have the resources to support you. Contact us today.