The “G” in ESG is perhaps the most important, because without good governance, efforts to support environmental and social priorities likely will fall short.
While the term ESG is often used in the context of investing, stakeholders include not just the investment community but also customers, suppliers, and employees, all of whom are increasingly interested in how sustainable an organization’s operations are.
As companies adopt an expanded view of the constituents they serve, environmental and social issues have gained more prominence in management and board agendas. Stakeholder capitalism has become one of the key concepts guiding how companies and boards view their purpose and responsibilities. Investors, employees, customers and regulators are pressuring companies about their commitments to issues like
All of this puts pressure on board members to act or risk losing customers, clients and talent. Good governance, then, is of paramount importance. Boards, working with management, have to sort through all of the noise — opinions, ideas and information — and make rational, informed decisions about how to set priorities, allocate resources and make investments.
