High Performance Boards, 2nd Edition

CHAPTER 34ESG Oversight in the Boardroom

Climate change, social justice, biodiversity, gender inequity – these are just some of the issues on the growing list of sustainability and social concerns that have dominated public discourse in recent years. This has been accompanied by increasingly vocal societal expectations of corporates to address these, and boards are taking notice. Of FTSE 100 boards 54% have now established some variation of an ESG committee¹ and more than 90% of S&P 500 companies publish ESG reports.²

While increasingly common on the board agenda, board oversight of ESG is complex for a number of reasons. Regulatory requirements are evolving rapidly, demanding considerable time and effort for organisations to remain conversant with, even for basic compliance. Clearly defining what is material can also be a challenge, as is the diversity and amplitude of stakeholder expectations. Identifying salient metrics to monitor ESG performance is not always straightforward. Finally, collecting and disclosing ESG performance is becoming a critical issue for both regulators – and investors. This chapter provides a framework for boards to come to grips with the key dimensions of ESG oversight (summarised in Figure 34.1) and the essential decisions it needs to make in order to thoughtfully exercise its responsibility and strategic acumen in this area – including a study we did which helps shed light on how to avoid the risk of greenwashing.

Figure 34.1 ESG Compliance Oversight: ...