![]() In addition, the research highlighted variability in ESG oversight by industry. Even with rising stakeholder interest and increased accountability for board oversight of ESG, 28% of the S&P 500 companies still do not disclose how the board has defined the governance structure. Although it appears as though a large percentage of companies have delegated oversight responsibility for ESG initiatives to the nominating and governance committee, some have chosen to establish a formal ESG/Sustainability committee, and many currently have the full board taking the lead. In order to better understand the governance structure companies are implementing to oversee ESG initiatives, Deloitte analyzed S&P proxy statements and considered whether the full board or a specific board committee was noted as the primary oversight governing body for ESG initiatives.Īccording to Deloitte’s research, there is currently significant variability in board oversight of ESG. Boards have a role in guiding management on ESG initiatives, as well as making clear, stakeholder-informed decisions that can position the company as a leader in its industry and among its peers. In many cases, the effects of the COVID-19 pandemic and the social justice movement have prompted companies to move along the maturity scale at a quicker pace.Īs companies evolve from “Responsive” to “Enhanced” and, ultimately, to an “Integrated” ESG initiatives program, the role of the board in prioritizing oversight of ESG initiatives will also increase, requiring further maturity of the board’s governance structure. As companies consider how to best integrate ESG into the business strategy, it may be helpful to consider the current state of its ESG program and determine how the company will mature the ESG program from one that is responsive to one that is proactive, intentional, and integrated into the core business strategy and risk program. ![]() ![]() While some companies are just beginning to think through how their corporate purpose and ESG objectives are integrated with their strategy, others have already assessed their material ESG factors and have robust board oversight of management infrastructure that defines, monitors, measures, and communicates their story to stakeholders. There is heightened pressure and focus by investors and other stakeholders to understand how companies create long-term value by incorporating ESG objectives into strategy and key decisions. Included in this is how the board defines its committee structure and delegates oversight responsibility across the board and its committees. The “G” can be described as the governing structure, policies, and practices employed by an organization to define responsibilities and decision-making rights that provide the foundation for overall accountability and credibility. The ”G” in ESG and the important role the board of directors and each board committee plays in overseeing the company’s transparency around sustainability initiatives continues to be a primary focus in the ESG conversation. Many companies have also reevaluated their corporate purpose and ability to drive the long-term sustainability of their enterprise by addressing environmental, social, and governance (ESG) strategies and challenges. While 2020 has been a challenging year for many companies, the pandemic has provided a reason to spotlight the importance of a purpose-driven strategy to drive business and societal value and highlighted the interrelationship between long-term corporate strategy, the environment, and society.
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