What ESG initiatives are most vital for boards to understand? Our specialists discuss how boards and ESG teams can collaborate to make ESG a priority.
Board members are tasked with the long-term financial security of an organization, and now more than ever, environmental, social, and governance (ESG) initiatives factor into that security. However, there are so many priorities, trends, and rapidly evolving ESG initiatives that the board must be diligent in staying current.
By working with the company’s cross-functional ESG team, boards can get a complete picture of ESG roles and responsibilities within their organizations and gain the knowledge about ESG initiatives that they need for solid decision-making.
Here are three ways the board can collaborate with the ESG team to help make ESG a priority for the entire organization.
1. Get educated on ESG initiatives
It’s vital that the board has knowledge of ESG trends, regulatory requirements, and other key stakeholder needs. With so many facets to ESG, gathering that knowledge can be a complex and complicated task. But with the help of the cross-functional ESG team, it’s an achievable one.The board can start by engaging in ESG training, a core component of which should focus on regulatory obligations, including the upcoming climate-related disclosure proposal from the Securities and Exchange Commission (SEC). The ESG team can help facilitate this training, with assistance from external legal counsel and consultants as needed.
However, climate risk is only one aspect of the regulatory landscape. In the near term, the SEC likely will issue proposals on human capital disclosures and corporate board diversity. Plus, many other global regulations regarding forced labor, responsible sourcing, and supply chain due diligence could be impactful. The board will want to know what’s on the horizon and gain an understanding of how these proposals could affect the organization in the short and long term – both as a direct reporting obligation and through data requests from its global customers.
The board should also review the ESG goals and commitments that the company has made, which could include commitments related to employee diversity, conversion of energy to qualify for green financing, and energy use for buildings, property, and equipment. The board should be familiar with management's plans to train employees on ESG initiatives and acquire dedicated ESG talent.