ESG discussions in the boardroom

This week we want to share our notes from a webinar organized by Korn Ferry on what they are hearing from their clients on sustainability discussions taking place in the boardroom. In the words of Don Lowman, Senior Partner and part of the webinar: “ESG and sustainability have become some of the most frequent and common topics of conversation with our clients. And that’s true across industries and around the globe.” Some of these conversations are simply about defining and understanding the issue, while many others are about what can or should be done to achieve real progress.

The webinar discussed the pressure that is coming from different stakeholders for companies to address complex sustainability issues. Here are the 5 key messages we heard in the conversation:

1. Is ESG here to stay? Yes. Boards should know what the material sustainability topics for the company are, channel adequate resources towards ESG goals, and develop the right governance structures to provide proper oversight and generate accountability.
2. What’s the best way of getting the board behind ESG? The pressure from stakeholders (particularly investors). Pressure for more and better strategies and disclosures is likely to rise. Because of that, executives must now own up to ESG issues as they do with every other strategic and management issue.
3. Who should control ESG efforts within an organization? It depends. Companies must understand that sustainability issues can pose a threat to their businesses. There is a tendency to address ESG issues from a compliance perspective. However, boards must be able to go deeper and really ask themselves: how is this issue impacting our strategy? There is a need to look at how sustainability feeds into risk management systems too. For this to happen, the right teams must be brought onboard to deal with sustainability topics, and sometimes the creation of a Sustainability Committee (with board members as participants) is a very important step of this process.
4. Is it appropriate to hold board members accountable for overseeing and implementing ESG strategies? Yes. Board members should be involved in developing and implementing a company’s sustainability strategy, as well as overseeing its execution.
5. What risks will companies face in the future if they fail to address ESG concerns? It depends, but they range from funding issues all the way to climate related issues. Some companies think ESG is just an added compliance cost. Other companies that truly integrate sustainability concerns into decision making processes are developing a competitive advantage over time. If a company chooses not to pursue sustainability, it will eventually face better-positioned rivals.

It is clear to us that addressing sustainability issues should be part of any company’s business strategy. Failing to do so puts a company’s future at risk. Boards will have a very important role in guiding organizations through a changing business environment that increasingly demands sustainable competitiveness and awareness.

I hope you find this interesting and, as usual, if there is anything we can help you with, please reach out.

Best,

Marimar

CEO, Miranda ESG