New Diligent Solution Turns ESG Promises into Progress

“Let’s not [spend] all our time on the metrics. Let’s think about how we get groups or constituencies to take action. That’s what we have to move to: taking the action [that will] move the metrics, not arguing about the metrics and the calculation.” – Brian Moynihan, Chairman & CEO, Bank of America

Over the last several months, the importance of our stakeholders has come into sharper focus. Decades of short-term quarterly reporting and questionable policies—not to mention, a global pandemic—have revealed weaknesses in corporate focus, supply chains and leadership. Once-lofty concepts like stakeholder capitalism and ESG are now a global imperative—and every board and company, public or private, needs to act.

“The way forward” is the overarching theme of our October 7 panel hosted by Diligent and the World Economic Forum (WEF). For this virtual event, I am honored to reconvene our June 2020 panel, a group that’s already hard at work to bridge the gap between stakeholder interests and economic vitality:

• Brian Moynihan, Chairman & CEO, Bank of America, Chair of WEF’s International Business Council
• Klaus Schwab, Founder & Executive Chairman, World Economic Forum
• Carmine Di Sibio, Global Chairman & CEO, EY
• Betsy Atkins, Board Member, Wynn Resorts, SL Green Realty, Volvo Cars

If you’re not familiar with the World Economic Forum’s International Business Council (IBC), I encourage you to read up on their work towards a global set of ESG metrics. This coalition of 140 CEOs is focused on an important goal: consolidating all existing ESG frameworks (e.g., SASB, GRI, etc.) into a set of global standards—in other words, arriving at a better set of metrics by which we can measure corporate success. As Brian Moynihan pointed out, we must now focus on how we use this new scorecard to drive change.

As the World Economic Forum’s new metrics are adopted and refined, Diligent is enhancing its technology in exciting ways. Companies can now track and measure their progress against these new ESG metrics within the Diligent Compliance platform—just one aspect of a new Diligent offering I’m excited to share more about.

The Board's Role in Operationalizing ESG

In a recent article, Betsy Atkins talked about why boards should be paying attention to ESG. Those in doubt can simply follow the investment dollars. By year 2025, an estimated 50% (or $24 trillion) of assets under management will be focused on ESG. Meanwhile, institutional investors are applying pressure across the spectrum of ESG initiatives—not just gender diversity, but climate risk as well.

Boards must recognize that the pendulum is swinging. Investor imperatives aside, organizations can tap an incredible store of competitive advantages—related to talent acquisition, innovation and flexible operations—at a time when these things feel hard to come by.

“Let’s not forget that ESG is not just a burden. It’s a fantastic means to strengthen the competitiveness of a company. Because in the end, a company which can rely on better and more committed employees—a company which can rely on loyal customers and on [financial] access—has a competitive advantage.” – Klaus Schwab, Founder & Executive Chairman of the World Economic Forum, during Diligent’s virtual panel

To start, the board's focus on ESG should be three-fold:

1. Education: Boards must ensure they are educating directors on ESG frameworks, investment trends, institutional shareholder guidance, etc. ESG should be an ongoing topic of board education and a fixed item on the board agenda.
2. Preparation: Boards should work with management and ask questions about the data that is available. What are we already doing? What targets should we set? How can we track meaningful progress across each aspect of ESG?
3. Measurement: Decide on a framework by which organizations will track. Whether your company uses the World Economic Forum’s core metrics or starts with a subset, they need to implement a system for measuring movement on those numbers (e.g., diversity, sustainability, etc.).

A New Diligent Solution for ESG

With a need to translate ideas to action, I’m thrilled to announce the launch of Diligent's ESG solution, a new offering designed to help organizations operationalize ESG and track progress against common frameworks. This new solution enables boards, executives, and other key business leaders to:

• Access to a library of sustainability standards and regulatory obligations;
• Track and improve overall progress towards their ESG goals;
• Identify risk areas and recommend corrective action or disclosure;
• Gather news and updates on evolving ESG regulations and frameworks; and
• Turn ESG standards and guidelines into outcomes.

Within Diligent’s library of frameworks, organizations can access sustainability standards like the World Economic Forum’s new ESG metrics, along with a mechanism for tracking data and progress towards long-term goals. With seamless reporting, boards can identify red flags and even monitor stakeholder sentiment through daily/weekly email updates.

In the end, operationalizing ESG involves a range of actions, stakeholders and data points—and organizations must avoid reinventing the wheel. Work by the World Economic Forum and other metric-setters provides a roadmap for company leaders, while platforms like Diligent put the right data and capabilities at their fingertips.

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A recent survey by the Diligent Institute tells us that boards expect to discuss ESG more frequently in the months ahead, with 73% of directors anticipating quarterly discussions (up from 47% pre-COVID). The shift for many directors is less a sea change and more inevitable:

"In a world characterized by natural resource scarcity and radical transparency (the internet) you are simply not going to maximize financial wealth if stakeholder interests are not given due consideration. The debate between ‘shareholder primacy’ vs. ‘stakeholder’ schools of corporate governance is now moot.” – Board member via Stakeholder Capitalism: Translating Corporate Purpose into Board Practice

Diligent is poised to support organizations no matter where they are on their ESG journey. Together with partners like the World Economic Forum, we are dedicated to keeping you updated in the months ahead. Learn more about the new Diligent ESG Solution and subscribe to our newsletter for further updates on ESG metrics and framework developments.