Some key learnings from the discussion were:
- Incorporating sustainability and ESG into purpose and strategy is not a separate exercise
For a purpose-driven organization, its purpose and strategy are fundamentally based on doing the right thing for society and various stakeholders. With this premise, embedding sustainability and ESG is not done in isolation; it is a core part of how an organization responds to challenges, risks, and opportunities affecting value creation in the context of the needs and expectations of stakeholders, and in line with planetary boundaries. Sustainability and ESG affect all organizations of all sizes and across all industries and sectors, including the public sector, and accountants serving as board directors are at the center of sustainability discussions.
- Aligning sustainability and ESG priorities throughout the organization can be a challenge
Boards are the stewards of long-term value and have an obligation to be bold in setting the strategy and embedding a culture that embraces sustainability and ESG and encourages innovation. But a key challenge for boards is ensuring a common understanding of, and alignment on, sustainability and ESG priorities throughout the organization. CFOs and finance functions have an important role to play in supporting the board by helping to break down organizational siloes and foster anintegrated mindsetto think, measure, manage and report in a more integrated manner.
FAQs
To set a proper governance structure, board members should understand how sustainability is linked to strategy, opportunities, and risks. Considering the complexity of a typical sustainability integration, directors should also be familiar with the specifics, including measurement criteria, to monitor progress.
What board committee should oversee ESG? ›
As ESG is so broad, oversight responsibilities may be split across committees, for example: The audit and/or risk committee overseeing risk management. The audit committee overseeing disclosure against standards and regulations and related assurance.
What is the role of the board in ESG? ›
Overseeing how the ESG strategy aligns with the company's business strategy is a job for the full board. But each committee also has ownership over some element of ESG issues, and so coordination and communication are key.
Has ESG lost momentum in the boardroom? ›
The oversight of ESG is now firmly falling on the shoulders of the full board, according to nearly half our survey respondents (49%). This trend holds for the U.S. and Europe, at 45% and 55%, respectively.
What is the focus on sustainability and ESG? ›
While both ESG and sustainability are concerned with environmental, social, and governance factors, ESG focuses on evaluating the performance of companies based on these factors, while sustainability is a broader principle that encompasses responsible and ethical business practices in a holistic manner.
What is ESG and examples? ›
ESG is a practice in which investors consider a company's environmental, social and corporate governance impact when making investment decisions. This makes ESG not only a priority for investors but also an imperative for corporations that want to both attract more shareholders and satisfy those they already have.
What are the responsibilities of board oversight? ›
In the area of quality, for example, the board's oversight role may include setting the tone by stating that the organization is committed to quality; establishing policies related to quality, such as credentialing; ensuring that mechanisms are in place, such as committees, to establish a plan for quality; and ...
What is the role of ESG in sustainability? ›
ESG risk management supports sustainable, long-term growth by proactively evaluating potential issues; early knowledge of potential risk provides more time to adapt and develop cost-mitigating strategies.
Who is responsible for ESG in an organization? ›
The responsibility for ESG initiatives can fall on various shoulders, ranging from a Chief Sustainability Officer to a designated ESG Committee. The optimal structure often depends on the company's size, industry, and strategic priorities.
Why are people against ESG? ›
“They may also argue that considering ESG factors could conflict with a fiduciary's duty to act in the best financial interests of plan participants. Some opponents also believe that ESG investing is politically motivated and could lead to biased investment decisions.”
An ESG controversy case is defined as either an event or an ongoing situation in which company operations and/or products allegedly have a negative environmental, social and/or governance impact.
Why is ESG underperforming? ›
Missing out on returns from the so-called "Magnificent Seven" tech stocks was one of the biggest reasons for underperformance. Meta, Alphabet, Tesla and Amazon were all excluded from certain ESG indexes due to ESG controversies or because they had a high ESG risk relative to others in their sector.
Who regulates ESG in the US? ›
In the United States, ESG-related regulatory risk primarily originates from three key sources: the US Securities and Exchange Commission (SEC), the US Department of Labor (DOL), and state legislatures and agencies.
Who oversees ESG? ›
In some cases, usually in smaller companies, ESG oversight is delegated to the top management, and falls under the responsibility of a chief sustainability officer, a dedicated executive committee, or the chief executive.
Who is the head of ESG and sustainability? ›
The Head of Sustainability and ESG is a senior leadership position responsible for developing and implementing sustainability strategies while considering the environmental, social, and governance impacts of an organisation's operations.
