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Growth of ESG governance

Tue 12 Jan 2021 | 02:52 pm GMT
Michelle Urquhart | Products of Change Writer

ESG should be integrated into business at board level

With ESG (environmental, social and governance) being of growing importance in the boardroom, what does it all mean? In the past, it was often the case that the board existed mainly for the purpose of added value for shareholders. But not so anymore, with more and more companies globally adopting mandates to address environmental, social and governance to look further ahead than shareholder value and really integrate ESG best practices into business models. A report from a virtual conference on ESG governance released late last year from Governance Professionals of Canada illustrates just how much ESG has moved on over the past year, given the background of COVID-19, Black Lives Matter and climate change. The report states: “More companies are adopting a societal purpose as the reason their companies exist. There is an emerging expectation that boards approve and provide oversight of the company’s purpose. Shareholder primacy is being questioned - instead, companies need to be responsive to stakeholders, creating broader value to society, not having a sole focus on profit for shareholders.” There is ESG regulation in most markets, forcing capital markets to think of their purpose which includes sustainable outcomes. For example, South Africa requires integrated reporting (in which companies disclose their financial and non-financial performance in one report) and requires boards to have ESG committees. One of the main messages from the virtual conference and the report was that companies and boards should not see ESG as a risk to the business, but rather as a source of value creation. Read the full report here Image credit: Business photo created by freepik - www.freepik.com
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