Ruairí Conroy is the Site Lead for Diligent Corporation in Galway
Note: This piece was originally published in Business & Finance magazine, vol. 59, no. 2, available to read, with compliments, here.
In the past, corporate governance wasn’t much of a conversation starter. But the world has shifted considerably in the last decade, and what once was considered a remote and distant oversight model is now a core component in measuring an organisations’ impact and whether commitments are being met. Organisations are under pressure at home and abroad to respond meaningfully to demands for greater transparency, and a desire for real leadership on global issues. As a result, it has become clear that a strong environmental, social and governance (ESG) policy is essential for employee, investor and customer loyalty.
Businesses are becoming more attuned to the importance of ESG but if they are not prioritising governance, companies will struggle to implement best practices to deliver environmental and social promises. The pandemic brought renewed concerns while exacerbating existing structural issues and forced board members to reassess their approaches to governance and pivot their strategies to meet the ever-evolving needs of their stakeholders.
Expectations have evolved; whether it be reducing carbon emissions, fighting inequality, promoting diversity or responding to a pandemic, businesses are being pressured to show they are part of the solution, not the problem. Efforts to achieve greater alignment between financial and sustainability reporting have also gained momentum. Organisations are under increasing pressure from customers, investors, legislators and regulators to act on global issues and be positive forces in society. In a global survey of over 500 board members, executives, and governance, risk and compliance professionals, more than half of respondents reported inquiries from customers related to ESG, and nearly half reported similar inquiries from investors. ESG – and being purposeful in corporate activity – is clearly on stakeholders’ minds.
ESG issues have become a make-or-break consideration. This pressure will continue to mount on Irish companies as an increased focus on issues like climate change and social inequities builds amongst stakeholder groups. Smart organisations are already planning to increase transparency across the board, including the ill-forgotten ‘Governance’ aspect of ESG, by analysing and reporting on metrics like revenues in countries with high corruption risk; fines related to business ethics; total amount of executive pay; or boardroom diversity, knowing it will be essential to meet growing stakeholder demands. But how does a business lead with purpose? And how can a business meet these calls for action? Accountability is key to success in addressing the environmental and social challenges our planet faces.
With ESG-reporting becoming a growing trend, boards need to ensure they have oversight of the key metrics required to document and evidence progress. An organisation’s ESG framework needs to empower stakeholders to drive sustainable policies and practices to boost themselves and the communities they serve, and set ambitious goals for growth and enrichment of the world. Having one enables companies to attract and retain quality employees, enhance employee motivation by instilling a sense of purpose, and increase productivity overall.
Corporate governance is a key enabler for companies to embed long term focus and one that is within an organisation’s control to change. Now is the time to reframe relationships and establish effective multi stakeholder engagement to implement those key corporate governance elements needed to drive real value for businesses long term. By effectively managing risks and identifying opportunities for improvement, Irish board members can guide their organisations into this new era of excellence.