ESG has become something of a buzz phrase in recent years.
Yet behind the media and misinformation lies a critical suite of issues which demand – and deserve – a seat at every board table in Australia, not to mention around the world.
You don’t have to look far to see that businesses and communities have, and are still, grappling with the social, political and economic impact of the pandemic. But perhaps one of the most heartening, and hopefully impactful, results of this pressure is how companies and individuals have reconnected with the human element – which I believe bodes well for how we as individual leaders and organisations, move on and move forward from this intensely challenging time and see ESG through a more holistic lens.
Each of the three pillars of ESG – Environment, Social and Governance – are massive topics which can lead, as with many so-called ‘big issues’, to generalisation and disconnection from the belief that we can create change. This is not to say Boards don’t want their organisations to move forward and succeed – quite the contrary! But in many cases, the definition of success is steeped in a tradition of financial margins.
They won’t be able to hold this stance for much longer though! Consumers and investors are agitating for change and putting increasing pressure on Boards to demonstrate greater social and ethical responsibility alongside sound financial performance. Boards that respond positively and proactively by raising their standards will be in a far stronger position in years to come – not only in the eyes of consumers and investors but internally, as the standardisation and formalisation in ESG reporting rolls out and holds everyone to account.
ESG demands commitment, long term focus and dedication to delivering on stakeholder expectations, including competitive returns. Whilst I’m quietly optimistic that increased standardisation and formalisation of reporting will be a good move, it’s clear that this is just part of a much bigger, and growing, global picture. Escalating issues such as data security, indigenous rights, and employee expectations aren’t aligned within standardised and formal reporting obligations and should remain a focus for society and business at every level. Boards need greater clarity and simplicity in key areas like strategy, capability and culture if they are to effectively navigate these and other confronting issues and still achieve organisational goals.
As you’ve (probably) heard me say before, leadership must start at the top, and ESG is no exception. It is the responsibility of every Board to pay close attention to financial and non-financial matters to ensure shareholder and non-shareholder expectations are met. The vast majority are very aware of this fact – though what each is doing about it right now is another matter. I’m sure some are feeling beholden to a seemingly infinite array of masters… but the reality is much simpler.
Where have you seen a Board demonstrate effective ESG leadership?
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