This week, I would like to talk about ESG governance. Many of our clients wonder what the right approach to this is, and here we want to offer some food for thought.
- Successful ESG governance requires a clear understanding of what responsibilities will go to board members and which ones will go to management team members. There is room for everyone, but not everyone should be doing the same thing.
- Ideally, the board should be in charge of final oversight, as with other matters.
- The management team, together with business division heads, should implement the board’s approved ESG vision, propose initiatives to reach sustainability goals, and provide board members with relevant information for effective decision-making.
- Establishing a strong ESG governance structure requires that the board has the necessary expertise and resources to effectively oversee ESG matters. This sometimes (many times) means board members should be trained on ESG topics. It also means board members should be selected considering sustainability expertise.
- ESG oversight committees can be helpful, especially if they are composed of members that truly care about sustainability and want to help shape the company’s strategy and performance. ESG Committees that are formed by people who are indifferent to these topics are generally not that effective.
- ESG implementation committees also help, especially if they include representatives from all relevant business units and functions, to oversee the implementation of the sustainability strategy and ensure that it is integrated into all aspects of the company’s operations.
- ESG experts can join either (or both) committees if deemed appropriate. This can make the process of establishing and improving a sustainability strategy more efficient.
- While not always necessary, dedicated sustainability teams, with a senior sustainability executive who reports directly to the CEO or board, can help drive sustainability initiatives across the organization.
- Companies should establish the right incentives and accountability mechanisms to ensure that sustainability is fully integrated into individual and team performance objectives.
I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.
CEO, Miranda ESG
Contacts at Miranda Partners