- Companies that want to achieve their environmental and social goals need strong governance to do so.
- Good governance can help companies close the gap between their ESG objectives and their performance.
- The conversation was part of Insider’s virtual event “Financing a Sustainable Future: Advancing Effective Corporate Governance,” in partnership with Bank of America, which took place on Tuesday, June 14, 2022.
- Click here to watch a recording of the full event.
It can be easy to get workers excited about a company’s environmental and social goals, but achieving those goals requires the most tedious but essential work of establishing good governance.
That was the assessment of a panel of experts who participated in Insider’s recent virtual panel, “Financing a Sustainable Future: Advancing Effective Corporate Governance.”
Having clear goals for governance tracking and reporting is just as important as any other metric a company might use, panelists said. The event, in partnership with Bank of America, took place on Tuesday, June 14.
Improving governance metrics can help companies close the gaps between their stated environmental, social and governance performance goals and what they are achieving, said Jennifer Steinmann, global head of sustainability and climate practice. at Deloitte.
“A lot of organizations have now said, ‘Here’s what we’re trying to do and how we’re trying to do it.’ But we’re seeing a pretty big disconnect between organizations that actually make that commitment versus action,” Steinmann said.
To achieve environmental or social goals that companies might have set, it is imperative to have strong governance mechanisms in place that can help break down goals into daily steps that many people within an organization can follow.
“We only see 19% of organizations doing these needle-moving actions today. It shows that the intention is there, the desire is there, but the action hasn’t quite caught up to that yet” , Steinmann said.
To ensure that the scaffolding of governance reaches every part of an organization, leaders at the top must embrace these ideas. According to Mary Obasi, head of global climate risk at Bank of America, they also need to be sure that managers — and others — below in the company embrace the cause.
“You want to make sure all of your senior executives are talking about the mission, or integrating it into their respective roles, or making sure they’re fundamentally the voice,” she said. “In a large company, you want to make sure that you also engage your middle managers to carry the torch in what they do every day. Even beyond that, your entire employee base .”
Caroline Roan, director of sustainability at Pfizer, said good governance does more than show whether a company is meeting its commitments. It can also help attract workers, which is all the more important in a tight labor market. By clearly explaining how, in Pfizer’s case, it brings life-saving vaccines to the world — and by clearly explaining how it developed them — the company can achieve its goal of improving people’s health and can inspire future workers. “It really attracts people who are really motivated,” Roan said.
The ability to show what standards companies have in place and how well organizations adhere to them relies on the availability of good data. That can be difficult, Steinmann said, especially when companies have to work outside their walls, such as with suppliers. “It requires a bit of extra muscle that most organizations are still starting to work on,” she said.
Variations in still-emerging regulations regarding ESG reporting, such as the rules the Securities and Exchange Commission has proposed regarding climate-related issues, have created a difficult time for companies.
Roan noted that there are many reporting standards that companies are now grappling with. “It’s alphabet soup,” she said.
Steinmann said it would be helpful to be clear about how companies should measure their ESG work. “The area where I see potential for evolution, and hopefully sooner rather than later, is really getting a consistent measurement standard,” Steinmann said. “It would really help organizations.”