Sustainability is in the spotlight and ESG priorities will pose both challenges and opportunities for companies now and in the future. The approach to ESG management includes having robust governance systems, risk management and controls; striving to serve the customers exceptionally and transparently; investing in the employees and cultivating a diverse and inclusive work environment; working towards strengthening the communities in which we live and work; and advancing sustainable solutions within the operational system.
As social, political and cultural attitudes continue to evolve, governance risks and opportunities will likely increase, which makes it imperative to understand the “G” in ESG. If we talk about the corporate governance structures, the core elements include corporation’s purpose, the role and makeup of boards of directors, shareholder rights and how corporate performance is measured. Financial and accounting transparency and full and honest financial reporting are often considered key elements of good corporate governance.
Governance factors indicate the rules and procedures for countries and corporations and allow investors to screen for appropriate governance practices as they would for environmental and social factors. More investors are seeing the connection between ESG performance, value creation, and risk reduction.
Robust corporate governance and a central role for boards are critical for getting on the front foot with ESG and achieving the cultural and mindset change needed to drive sustainability transformation. To build a winning strategy, boards must have the operating model, data, and capabilities to provide strong direction and support, whilst also adopting innovative approaches to reward and renumeration and investigating new ways to optimize ESG reporting.