ESG topping the charts!

Environmental, Social, and Corporate Governance is firmly in the spotlight. Yet for many Boards this is a complex subject.  Shareholders and investors – but equally important – employees and customers, want to work for/buy from organisations that have a clear and transparent ESG policy.

As the topic is broad and will have different points of emphasis depending on the sector/type of business, an initial challenge for any Boards will be in qualifying the specific focus of their ESG Policy,

But what is an ‘ESG Policy’, and why is it increasingly important for Boards to get right?

Essentially, an ESG Policy is a set of standards which permeate through all a company’s operations, grouped loosely into one of the three headline topics:

E – How does the organization’s operations interact with the natural environment in production, waste disposal, sustainability, and what is its strategy for not just preventing damage, but improving the environment?

S – How does the organization manage its relationships with its employees, suppliers, customers, and (importantly) the COMMUNITIES where it operates? What are its views on equality for all, and how does the business reflect this? What can be seen of its values and ethics, and approach to inclusion and diversity?

G -This is usually well covered as it is reflected in the regulatory framework that the organization adheres to. But there is more to it … governance deals with a company’s leadership, its remuneration and pay throughout, its internal checks and balances, and shareholders rights.

For organizations looking to gain a competitive advantage, they must create a clear roadmap on what their ESG looks like, not just for today, but for the future. This ownership rests with the Board to create and then execute a strategy which reflects the needs of the business, its people, and its community. The QCA (Quoted Companies Alliance) recently conducted a survey of their members on this topic. The overall findings were that ESG was not well understood and in many cases, organizations were at an embryonic phase of the journey. They suggest that when discussing this very important topic, Boards ask themselves several key questions:

  • Does your Board have the necessary understanding and experience of ESG factors to make an informed decision about what they need to do? If not, how can this be addressed?
  • Are you clear on what the material factors are for your geography, sector, and individual business?
  • Has someone been identified as being responsible for ESG on your Board? How do they report on this to investors and stakeholders?
  • Are you aware of the opportunities that may arise from improved ESG communication for your company? How could active acceptance of ESG help you gain a competitive advantage?
  • Have you examined the risks that may arise from not communicating your ESG Policy effectively with investors and other stakeholders?
  • Have you asked what your investors and stakeholders want from you on ESG?
  • How are similar companies and competitors communicating with investors and stakeholders on ESG?
  • Recognising that this is a journey for us all, how do you explain what you are and will be doing on ESG in the coming years to meet the expectations of investors and stakeholders?

If all of this has raised many questions for you and your Board, then a good starting point is to call us. The Norman Broadbent Group is working with a number of organisations in developing and implementing ESG across UK as well as international businesses. This can be in the form of introducing expertise in the form of an Interim Consultant to help create a roadmap, or through looking at individual pillars of your ESG strategy and how to implement them. It could be in the form of conducting a unique piece of Research & Insight which enables you to understand how your competitors or other firms have tackled similar issues, fuelling ideas and giving an insight to formulate your strategy. Equally it could be in the form of recruitment, supporting with diversity and gender balance across the Board and future leadership team.

If you would like to discuss this article further, learn more about The Norman Broadbent Group, or discuss specific Environmental, Social and Governance challenges, please do not hesitate to contact Andrew Smith via andrew.smith@normanbroadbent.com for an initial confidential discussion.