The Brief / Governance A N A LY S I S
The ‘G’ In ESG: Exploring the impact of corporate governance Getting the governance proposition right can present an opportunity for companies to drive sustainable, long-term value creation
1. DEFINING AND DRIVING GOVERNANCE So, you’ve arrived at a critical juncture where your organisation wants to level-up its ESG approach. However, knowledge gaps exist with regards to which governance interests should be prioritised within the corporate decision-making process. At this stage, being aware of governance risks and opportunities in the decision-making process is essential. The two most important steps here are: Evaluating the corporate governance performance of an organisation involves laying out additional key metrics that evaluate the organisation’s 14
August 2022
ILLUSTRATION: GETTY IMAGES/BOOBLGUM
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he ‘E’ and ‘S’ in ESG (environment, social, governance) have had no shortage of attention following the Covid-19 pandemic and the rate at which the global climate crisis continues to heat up. Despite this, ESG goes beyond an isolated consideration of ‘E’ and ‘S’. In fact, by leaving governance factors out of the decision-making process altogether, organisations risk missing a crucial opportunity to fully leverage the power that comes with embedding sound corporate governance and risk management systems into their corporate pillars. This can spell disaster in a world where failing to act on governance matters – and omitting a holistic ESG consciousness – could induce implications for the financial performance of an organisation, as well as those investing in its future. On the flipside, getting the governance proposition right can present an opportunity for companies to drive sustainable, long-term value creation. As boards enter the financial disclosure period for 2022, three certainties are apparent. The world continues to evolve rapidly, new generations of investors are influencing the investment sector like never before, and technology has an immense role to play. Here are five key governance considerations that all organisations need to be cognisant of when striving to embed the full breadth of ESG values and address systemic risks.
HAVING STRONG GOVERNANCE CRITERIA CEMENTS THE FOUNDATIONS FOR SUCCESSFUL ESG MANAGEMENT
management systems, as well as its ability to manage long-term environmental and social risks and opportunities. Systems and structures in place to transform the organisation towards a model that will deliver sustainable business advantages and measurable value. 2. THE CORE PILLARS OF GOVERNANCE With ESG strategies maturing faster than initially predicted within many industry forecasts, it’s easy to become caught up in the hype and need to accelerate ESG adoption. However, it’s essential to understand the key governance pillars involved and which of these apply to an organisation’s context before jumping straight in or spending time addressing the wrong areas. These pillars are: gulfbusiness.com
