Work with the CSO to deliver on the G of ESG
Strong corporate governance and transparent communication are key to making sure organizations are ethical and outperform their less-well-governed peers. That’s why asset managers pay so much attention to governance: in a 2021 Russell Investments Survey, 80% said it led their ESG-related decisions. And according to Insightia, 67% of all the companies subject to ESG activist demands in 2021 were dealing with ones around governance.
By assessing the organization’s maturity levels in terms of ESG, CSOs can spot where it’s vulnerable to any regional focus for activists and immediately mitigate those risks. Conducting an ESG peer review and using the findings to make positive changes will also help. Boards can actively support by advocating for such a review, as well as communicating effectively with investors through earnings calls and clearer proxy materials.
Make ESG a measure of executive performance
The board can reinforce the organization’s commitment to upholding the highest ESG standards by working with the CSO and the compensation committee to build its goals into executive remuneration and incentive plans.
2. Prioritize the ESG agenda and learn from each other
A CSO’s success depends on the board and the management team spending quality time together regularly. They need this time to discuss, determine and agree upon the organization’s ESG risks, as well as the opportunities to drive differential value. Here are some specific actions they can consider:
Work with the CSO to make ESG core to the business strategy
It’s the CSO’s job to present and make the case to the board for why their ESG strategy is the right one for the organization. Making the link between sustainability and strategy will help to engage them. In return, the board should make sure ESG is fully integrated into the business strategy for the now, next and beyond.
Alan Haywood, Senior Vice-President ESG at BP, recommends CSOs make the link between sustainability and strategy. “In today’s world, as we navigate the energy transition, strategy and sustainability are going hand in hand,” he says. “It's helpful to bring them under the same umbrella, under the same leadership, to drive progress at pace as we engage the board.”