The broad scope and inherently dual nature of environmental, social, and governance issues—which facilitate the creation of business opportunities and reputational value, while companies also manage risks associated with ESG impacts—present a significant governance challenge for boards.
To ensure a practical focus on providing effective oversight of ESG, this week NACD published Strategic Oversight of ESG: A Board Primer. NACD developed the primer in part at the request of directors who are becoming increasingly aware of the importance of ESG to investors, consumers—and their company’s bottom line.
Specifically, in the 2019–2020 NACD Public Company Governance Survey, nearly 80 percent of directors reported that their board is focused on some aspect of ESG, with 52 percent seeking ways to improve their own understanding of their company’s ESG performance.
The primer outlines four fundamental challenges and corresponding solutions for boards in overseeing ESG issues:
Boards need to continuously assess their effectiveness in addressing ESG risk, in terms of their fiduciary responsibilities and their oversight of management’s activities.
Key Questions Directors Should Ask:
The blog post Understanding the Board’s Role in ESG provides more perspective on the key challenges identified above. The blog Realizing the Climate Opportunity explores some of the opportunities climate change provides for efficiency, innovation, and growth. Visit NACD’s ESG Oversight Resource Center to explore the latest ESG resources for the latest information to help boards engage with sustainability and social responsibility initiatives.