Let us address E(SG)lephant in the Boardroom!

The UN Global Compact Sustainable Development Goals (SDGs) are at the heart of “Agenda 2030. Aiming to end extreme poverty, fight inequality and injustice, protect our planet, the plan is adopted by all the member countries of UN for achieving a better and sustainable future. These goals provide a framework and a tool to analyze business risks and opportunities for long term value creation.

      

Last year the market regulator SEBI came out with disclosure requirements under Business Responsibility and Sustainability Reporting (BRSR), covering environmental, social and governance (ESG) parameters for the top 1000 listed entities by market capitalization. Surprisingly, out of these entities, most of the Indian corporates are still taking cognizance of how ESG impacts them and their business ecosystem. Certainly, a gap seems to exist between the extent to which boards recognize that sustainability is a critical business issue, and their effectiveness in measuring and managing it.


For many organizations ESG as a term is extremely fascinating and looks like a feel-good factor that can attract investors. However, given the heightened interests from various stakeholders, corporate directors need to know that ESG is much more. Far from being just window dressing, there are real risks at play when it comes to ESG issues, and even more opportunities to be seized.

If boards are actually striving to make a sustainable difference, here are some tasks that can help boards to fulfill their crucial role in ESG oversight.


  • Align and link the purpose and strategy of the Company

Every board must consider a comprehensive task of aligning the purpose of the company with its strategies and assess whether the purpose of the company actually reflects in the strategies or no. For example – Boards can now address to incorporate issues like climate change and income inequality into the organization’s strategic goals, particularly as these topics remain top of mind for investors focused on the long-term viability of their portfolio companies.

 

  • Establish reliable ESG information

Companies can choose from a variety of disclosure regimes for their ESG information, and using the right metrics is key. Guided by the concept of materiality, boards should affirm that the information prepared by the company is consistent and reliable.

 

  • Craft the right disclosures

Having the strategy aligned with the purpose of the company and access to the reliable ESG information, boards can now curate their style of communication and messaging to the stakeholders on how ESG has become a part of their day to day working and what will be its impact on overall existence of the company as well as its stakeholders in the long-run. Most importantly while making such communications and disclosures to various stakeholders, checks should be set up to evaluate what information is disclosed, where it is disclosed, how it is reviewed, and whether it fully reflects the company’s purpose and strategy.

 

  • Allocate Oversight Role

Though overseeing the implementation and impact of ESG strategy on the company is the responsibility of the entire board. However, delegating authorities and allocating roles to specific committees formed internally can help boards to sail smoothly. This delegation shall ensure smooth and timely decision making, access to the ready and streamlined data as well as boards will have also had significant time to work on the gaps observed. The only key here would be to work in coordination and have trust in the team.



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