Harnessing Governance During COVID-19 to Accelerate Board ESG Oversight Now and Post Pandemic
April 27, 2020
On April 21, Michael Hartmann, Principal of The Directors College with guest panelists Judy Cotte, CEO at ESG Global Advisors and Coro Strandberg, President of Strandberg Consulting and Faculty of The Directors College discuss how boards can manage environmental, social and governance (ESG) components during the pandemic and how to better manage risk and generate sustainability long-term.
Best practices for board ESG oversight: Board competency (director recruitment and education), ESG is an integral part of the company’s Enterprise Risk Management Program, Board oversight of key stakeholder relationships, Ensuring the purpose of the corporation is relevant to today’s marketplace and active oversight of ESG disclosure.
Strong ESG practices are enduring and should be used as a lens to sharpen decisions during the pandemic. Human capital management, the COVID social response and Stakeholder relations have a heightened focus now. Future planning may become more free, as the crisis highlights potential opportunities to push innovation boundaries.
ESG has been a growing focus for institutional investors, and the pandemic is shining a brighter light on these issues. Three key areas of focus for investors in the near and medium term are a renewed focus on social responsibility, risk management and long term planning and executive compensation.
Investors are being encouraged to engage with businesses concerning their response to COVID-19. Companies need to be proactive with their ESG and pandemic disclosure now and post-pandemic.
Priorities post-pandemic will include re-visiting and formalizing the purpose of the corporation and the board forming a new level of oversight for stakeholder relationships. Boards will be updating their strategy based on learnings from their pandemic response and climate change will come more strongly to the foreground.
The pandemic has served as a potent reminder that our economies and supply chains are interconnected, and disruptions have far-reaching impact. The implications on health and global economies from climate change and health crisis’, like the current pandemic, could be profound.
Boards must remember that beyond immediate crisis management, their role is to steward their organizations in the long-term. Social risks are highlighted in the short-term, but in the long term, the focus needs to remain across all of the risks and opportunities for ESG.
Director competency needs to include ESG education and board composition may change in the medium term to encourage diversity and innovation. Strategic foresight tools will need to be developed.
“Only a crisis, actual or perceived, produces real change. When that crisis occurs the actions that are taken depend on the ideas that are lying around. And that, I believe, is our basic function – to develop alternatives to existing policies, to keep them alive and available, until the politically impossible becomes the politically inevitable.” ~ Milton Friedman
Lessons learned so far:
The broad focus for investors on ESG is not going away.
Boards need to work with management to refresh their purpose and measure their value against that purpose through ESG metrics.
Click here to watch the webinar.