ESG oversight tips for corporate directors


How thorough reporting can lead to positive outcomes


Environmental, social and governance (ESG) transparency is playing an increasingly important role in organizations’ ability to gain access to capital, attract and retain employees, and compete in the marketplace. During a recent NACD Private Company Governance Leadership Series panel, participants discussed how boards and management are working together to incorporate ESG considerations into strategy and operations.


“More customers are requiring sustainability reporting, sometimes in incredible detail. It requires a significant investment of time and resources to meet their requests.” 

Kristin Daley

Director, Blue Diamond Growers, McCain Foods, Tanimura & Antle, and Hazel Technologies

The panelists noted that companies that publicly share their ESG metrics can see positive outcomes, including the following:


A competitive edge


Many times, customer wins can be attributed to a company’s ESG efforts, especially in tie-breaker situations. In bidding for work from the federal government, for example, companies that provide climate-related metrics have an advantage, per the Executive Order on Climate-Related Financial Risks and Resilience executive order issued in May 2021. Further, on Nov. 10, 2022, the Biden-Harris Administration proposed the Federal Supplier Climate Risks and Resilience Rule to protect the government’s supply chains from significant climate-related financial risks.    


Stickier client relationships


ESG reporting can help grow a relationship beyond the purchasing office, where the focus is primarily on price. “When you get a request on ESG matters, you can often engage with more strategic teams, like a sustainability team, and discuss ways you can help them meet their ESG goals, thereby building a strategic partnership,” said Fahra Aslam, Managing Partner at Crescent House Capital.


Obtaining favorable financing


“In today’s environment, financing rates are often linked to ESG achievements — or lack thereof,” said Kristin Daley, Director, Blue Diamond Growers, McCain Foods, Tanimura & Antle, and Hazel Technologies. Aslam agreed, sharing, “Value creation does happen on the financing side, garnering advantageous rates on debt.”


Attracting and retaining talent


Employees, particularly younger ones, often care deeply about ESG matters. To keep people engaged, it’s in every company’s best interest to track ESG metrics, especially in the social dimension, and pursue initiatives that will deliver measurable improvement over time.


While the benefits are clear, the path forward can be challenging even for experienced leaders. The ESG landscape is constantly evolving, and the bar is rising. Forward-thinking boards and leaders can take these steps:


1. Avoid misconceptions that can block progress. There may be competing priorities and viewpoints about ESG matters within the company and on the board. Common misconceptions, such as aiming for the high end of a maturity scale or trying to address all issues under the broad ESG umbrella, are often the root of differing perspectives. “Focus on a subset of issues relevant to your business and recognize that not all companies need to aspire to the highest level of ESG maturity,” said Grant Thornton managing director of ESG and Sustainability Services Marjorie Whittaker, who moderated the panel. 


“When we decided to transition from sharing selected metrics to the formality of an ESG report, we knew it would be an evolution, and that gave us comfort. The shift helps us move forward in our journey and we’ve had positive feedback internally and with our stakeholders.” 

Jessica Monson

General Counsel, Caribou Coffee

2. Make the decision to get started. There is also a misconception that a comprehensive reporting framework is necessary to get started. Boards can encourage leadership to think in terms of what they want to share publicly. “Choose metrics that are natural to the business and make it clear that no one expects perfection on day one,” said Aslam. A materiality assessment that determines the most important ESG topics to an organization’s stakeholders can provide a strategic focus for an ESG program, and charting performance against a maturity model helps set reasonable goals. While it’s not necessary to report on everything, it is critical to report on everything that is material to your business. “If there are glaring omissions, you run the risk of being accused of ‘greenwashing,” said Daley. 


3. Organize for success. Assemble a board-level team, with clarity on roles and responsibilities. This might be a good time to review the charter to ensure ESG has a place in at least one committee. Some boards assign oversight to a dedicated committee; others spread responsibility across multiple committees based on the specific topic.



4. Share knowledge. Boards can facilitate progress by inviting experts they may know from other boards or through professional connections. “There is tremendous value in learning from outside speakers and experts to help keep up-to-date on this topic,” said Aslam. 


Boards should also support knowledge sharing as they do for Caribou Coffee. “Our Sustainability Collaboration Forum is extremely helpful to understand everyone’s journey and learn from their successes and pitfalls,” said Jessica Monson, Caribou Coffee’s General Counsel.


A well-developed ESG strategy, including reporting, can be a very powerful contributor to growth, profitability, employee retention and other measures of success. It’s time to make it a bigger part of the board’s agenda. 




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