Why Board Members Should care about ESG Compliance Software

Environmental, Social and Governance (ESG) issues are a regular part of mainstream consciousness and are continuously gaining support. ‘Hybrid’, ‘upcycling’ and ‘diversity’ are a part of everyday vernacular and global culture has begun to expect environmental and social concern from everyone. When a company involves itself in its sustainability practices and social responsibilities, it becomes part of a greater purpose, connecting to millions around the world. Customers and partners hugely appreciate this social consciousness and it bodes well for a company’s future.

Every aspect of a business is affected by ESG from its very inception through to production and market share. Incorporating ESG compliance at every stage is not only necessary but it will create great value for your business and establish your position for long term success.

ESG covers a wide range of issues. To give you an idea of some of the points in consideration:

Environmental. This can include carbon footprinting, energy sources, recycling, hazardous emissions or waste disposal. What are the effects of your business on your immediate environment and on the world at large? From where do you source your energy? How does your business influence climate change? Are you using resources responsibly? 

Social. What could possibly match the importance of protecting our planet but protecting the people that live on it. Social issues covered by ESG include diversity, gender equality, mental health, forced labor, healthy working conditions, and parental leave, amongst others. Is your company inclusive? How are your labor relations affecting your reputation? Does your business reflect your consideration of a broad and diverse society? 

Governance. How a company governs their business has a great impact on its overall ethics and investability. Diversity in the boardroom, corruption and bribery, tax strategy, protecting shareholder interests and disclosing information on these topics all feature under Governance in ESG. Is your company making effective decisions? Are you complying with the laws and regulations? Are you meeting your responsibilities to external shareholders? Are your financial dealings transparent?

Don’t be fooled by its simplicity- the value of ESG assurance is greater than the sum of its parts. Not practicing ESG can threaten the stability of a company and if not practiced properly, can be seen as a sign of unethical or corrupt behavior. Overall, ESG gives all those with interest in the company visibility into non-financial matters that are relevant to value and performance. 

Board Level Responsibility for ESG

Having established that ESG is critical for a company’s reputation and market success, this means running a business with a social conscience has become key, particularly for investment firms. The transition towards sustainability and equity has become an integral consideration for investors who need to identify the long term risks and impacts, and maximize sustainability, with regards to a company’s ESG practices. 

The board of directors represent the shareholders and are ultimately responsible for a company’s success. An analysis of TSX 60 corporations shows that 52 out of 60 (86.7%) agree that their board is responsible for overseeing ESG-related matters (and/or at least one of its committees).

Action begins with the board. The attitude towards a company’s ESG compliance will filter down from board level, either creating a company culture that values behaviors that align with ESG concerns, or possibly the opposite. The reality is that the board are answerable to all the stakeholders; When all is said and done, a board of directors will be credited with the company’s overall success or blamed for their demise. 

The board is in a position to enforce best practices for ESG that will bolster reputation, market share, revenue, high equity returns and ultimately the sustainability of the company for the future. The board’s decisions will also minimize risk of legal or regulatory interventions, reduce costs, and motivate workers for increased productivity and top-line growth.  

An ESG Success story

BlackRock Inc. oversees the world’s largest sustainable exchange-traded fund (ETF). The CEO of BlackRock Inc. declared that the future of global capitalism was changing and that his company would lead the way by making it easier to invest in environmentally and socially beneficial investments. Whether they drove the trend or predicted correctly, this commitment to ESG has seen BlackRock Inc. grow their assets above $7 trillion. If money really talks, this money would be telling us to pay attention to ESG.

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What is the Best Way to Implement ESG?

The Harvard Business Review points out that where companies overcommit or overpromise ESG transformation, or make insincere pledges, they erode the public’s trust rather than strengthening it. Harvard’s article makes some astute predictions to the future of ESG compliance.

Using an ESG compliance program will ensure you are taking quantifiable action and making tangible strides in aligning your company with ESG compliance. It is the best tool at your disposal to ensure comprehensive compliance with all aspects of ESG, leveraging ESG risk assessments, ESG compliance checklists and more. ESG compliance management does not need to be overwhelming with the right approach and tools.

Here are some of the key predictions for the future of ESG requirements. Our solutions show how the board can ensure a smooth implementation using ESG compliance software:  

  1. Transparency in Reporting: Showing clear, standardized metrics to support ESG impact and progress

Providing the public with clear reports shows a company’s transparency and willingness to stand behind their decisions and practices. Look for an ESG compliance software that generates reports automatically from the collected data to save you time. 

Customizable reports should allow you to use insights to look both at the broader picture and zoom in on individual processes and policies. Ensure reports cover all technical aspects but are easy to understand too. There are an abundance of ESG reporting frameworks available that will guide you to provide high-quality, data-driven insights for your investors and key stakeholders too. 

  1. Accountability Across the Company

The world of ESG law is gaining momentum and accountability will soon be a regulated part of ESG compliance. Backing up your commitments with records of actions, audit trails, and quantifiable measures will go far in pushing your business ahead of the market as a leader of ESG integration. 

Organizing your systems, processes and policies via the lense of an ESG risk management framework will allow you to identify and mitigate gaps and align business objectives with ESG requirements. Look out for automated data collection, remediation and other time-saving features.

  1. ESG and Financial Performance

We are watching the connection between a business’s ESG impact and its financial performance increase in its correlation. You won’t know what your environmental or social impact is without a comprehensive ESG assessment so leverage software with preloaded ESG risk frameworks to easily collect and analyze data, and to be sure you have everything covered. 

  1. Third-party’s ESG Will Affect Your Business Too

Responsible investors are increasingly concerned with how a company assesses their ESG risk. Your vendors, your supply chains or your investments are no longer a separate commodity. How they govern themselves will directly affect you and your company. Due diligence is crucial to stay ahead of third-party ESG risks and spare yourself from damages, boycotts and penalties.

Look out for an ESG risk management platform that can help you assess, categorize and prioritize vendors or potential investments. Cutting-edge ESG software will enable you to provide your portfolio with the tools to remediate and improve their ESG posture, whilst giving you full visibility into their progress in real time.

Board members don’t need to be convinced of the importance of improving their relationship with ESG compliance. The clear benefits and added value are enough of an incentive to drive efficient implementation of improved ESG compliance. 

The Centraleyes Risk Management platform is the solution to ESG compliance and provides you with all the tools you need to automate the path to smooth ESG compliance management. Book a demo and see for yourself. 

Start Getting Value With
Centraleyes for Free

See for yourself how the Centraleyes platform exceeds anything an old GRC
system does and eliminates the need for manual processes and spreadsheets
to give you immediate value and run a full risk assessment in less than 30 days

Does your company need to be compliant with ESG?
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