Organizational Governance Organizational Governance

Governance in the New Decade:
The Rise and Rise of Boardroom ESG

ESG governance is now an established imperative for boards; and a new report sheds light on steps companies should pursue to ensure the long-term viability of their organizations.

Brand Provided | By Coro Strandberg | Published 3 years ago | About a 3 minute read

Image: Christina @ wocintechchat.com/Unsplash

COVID-19, recognition of institutionalized racism, and climate change are rapidly transforming organizations and boardroom dynamics. Boards and governance professionals need to equip themselves to understand the evolving expectations of boards as society hurtles through the 21st century.

To help boards and their advisors get up to speed on this new governance trend, Governance Professionals of Canada held a virtual conference on the topic of ESG governance — which resulted in this report.

Over two dozen global experts in ESG governance and capital markets weighed in with their views on why and how boards should update their governance mandates to address accelerating ESG trends and systemic risks. ESG governance is now an established imperative for boards, and this report sheds light on steps companies should pursue to ensure the long-term viability of their organizations.

The main takeaways

ESG governance is now mainstream; and best practices exist — boards and advisors can use them to update their governance models to address ESG.
There is a significant gap in board ESG competency, which can be addressed through the recruitment of directors with ESG expertise and routine board ESG education.
There is a trend in companies moving away from shareholder value creation towards stakeholder value creation, and in companies adopting a societal purpose as the reason they exist.
COVID-19 has accelerated ESG, and paves the way for business model innovation and transformation towards a more sustainable future.
Global regulatory ESG developments will raise the bar for companies that need to keep abreast of these changes to reduce the cost of capital and to compete globally.
The role of the board and governance professional includes:
Being proactive and not reactive
Going beyond ESG risk mitigation to value creation
Considering stakeholders in decision-making
Keeping on top of regulatory ESG governance trends
Prioritizing the S in ESG — including Indigenous rights, human rights, employee rights, etc.

Finally, a number of panelists commented that ESG is moving from a focus on reducing risks to one of creating value — in the future, companies and their boards will need to think of ESG not just as a risk to the business but as a future source of value. Companies will need to have positive stakeholder relations and demonstrate their positive societal impact to thrive in the future.

For more on how boards can ensure their firms create stakeholder and societal value, check out this companion report on Purpose Governance: A New Role for Boards. With ESG governance now firmly entrenched as a board’s fiduciary responsibility, the next governance frontier is for boards to have oversight over the firm’s purpose – the reason it exists. Watch this space to see ESG and purpose governance become an established board competency — unlocking business assets, resources and platforms for the greater good.