How ESG became a Board Priority

Businesses have always had to evolve and adapt, and this year is no exception. Challenges that we are now so familiar with – post pandemic recovery; war in Ukraine; global socio-political turmoil causing supply chain insecurity; the cost of living crisis; to name a few are impacting the decisions made by business leaders. In 2023, they must pivot the organisation to reflect new market conditions, manage operational change and mitigate new risks.

2023 also presents an opportunity to review the capabilities and experience of board members. According to research by The Corporate Governance Institute, in addition to the traditional skills at governance level (finance, risk, audit) boards need to add new ones (such as marketing, HR, change management).

Why make ESG a priority?

ESG (Environment, Social, Governance) remains a priority for all boards regardless of company size or sector. No longer a tick box exercise, ESG is critical to operating a future-fit business and adding long-term value for stakeholders.

It should be at the very heard of an organisation’s strategy. ESG decisions relate directly to all stakeholder groups. A 2022 report from IBM stated:

Customers are more motivated than ever to make ethical choices. 3 out of 5 consumers say socially responsible or sustainable products made up at least half of their last purchase. What’s more, they paid a premium—an average of 59% more—for those products in the last 12 months.

Investors understand that there is a correlation between ESG rankings and financial performance. 62% of investors are now taking sustainability into account in their portfolios.

2 out of 3 Employees are more willing to apply for and accept jobs in organisations they see as ethical and sustainable.

Anything else?

Add to the mix the changing legislative landscape. Companies must adapt to new regulation such as the EU Corporate Sustainability Reporting Directive (CSRD) and have a clear strategy for disclosures.

All of this highlights why Boards must put ESG front and centre of their 2023 agenda. Larger corporates are more likely to have appointed a Chief Sustainability Officer or Head of Ethics to report to the Board. Smaller organisations may still be in the process of setting up their own governance frameworks or calculating ESG associated risks. If you’re a small or medium sized UK business looking to appoint new Board members in 2023 do get in touch to discuss the opportunities that lie ahead.

Lisa Basford is an ESG consultant and ex Marketing Director, Fellow of the Institute of Corporate Responsibility and Sustainability, Member of the Non-Executive Directors Association, Founding Member of MarketingKind and a trustee at Autism at Kingwood.

https://www.thecorporategovernanceinstitute.com/insights/news-analysis/corporate-governance-in-2023/

https://www.ibm.com/thought-leadership/institute-business-value/report/2022-sustainability-consumer-research