Publication | ThinkSet
Corporate Governance Update: How Boards Are Responding to a Heightened Focus on ESG
A Q&A with BRG experts on the board’s role in addressing ESG strategies and initiatives
Amid cries of greenwashing and a growing “anti-ESG” backlash, some have described this latest chapter as “the end of ESG.” But most corporate boards of directors do not see things that way. In fact, these considerations have long been on their agenda. If anything, 2023 has seen a refinement of ESG strategy informed by policy and regulatory developments, as well as a natural evolution of the three pillars—environmental, social, and governance—that make up the abbreviation.
Yet what does the newest chapter of ESG look like for boards? How has it heightened pressure on their performance—and their ability to oversee ESG strategy and initiatives? What impact has the current political and regulatory landscape had, and what’s to come in 2024 and beyond?
All this and more are discussed in our ThinkSet Q&A with BRG’s Tom O’Neil, Robert Yates, and Yanqing Lei.
From a corporate governance perspective, what have been the most significant ramifications of ESG over the past several years?
Most significant is the recognition that environmental, social, and governance are now considered holistically as not only a spectrum of potential risks, but also a set of strategic priorities, if not imperatives. For many years, boards have focused on each of the three pillars to varying degrees depending on the organization’s mission, core values, industry, and competitive realities. But they are now an integrated concept in C-suites and boardrooms alike.
For instance, corporations and nonprofit organizations have been working on environmental decision-making and initiatives for decades, but the urgency of climate change has had a remarkable impact on every sector across the globe. And not surprisingly, regulators have leaned in as well. By way of example, earlier this year the US Securities and Exchange Commission (SEC) proposed long-awaited rules for public companies related to climate-impact disclosures.
The social dimension of ESG, including the core concepts of corporate responsibility and diversity, equity, and inclusion, has become a North Star of sorts for many organizations. Over the past few years, corporate social responsibility has evolved to be a critical driver of a company’s culture and brand. Corporations are increasingly held accountable for human rights abuses and forced labor in their supply chains, as well as for staff and employee well-being and for cultivating an organizational culture that priorities diversity at all levels and nurtures an internal environment that is equitable and inclusive.