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Does your company have an ESG Committee?

08 March 2021

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This month we decided to see what The Chartered Governance Institute and Core communities thought about ESG reporting, disclosures, and committees.

This month we decided to see what The Chartered Governance Institute and Core communities thought about ESG reporting, disclosures, and committees.

When asked does your company have a separate department for ESG or does this fall under the company secretarial function, 56% said ‘there is a separate department’, whilst 34% said it was the ‘Company Secretary's responsibility’ and 10% said they ‘didn’t know’.

When asked if companies should link executive incentives to ESG-related metrics, many respondents answered yes. One respondent said: “Yes. Everyone should be informed of the impact of their decisions and how they affect various stakeholders and the external environment, and they should seek out opportunities to be more sustainable in financial, environmental and in people terms” and another said: “Absolutely. Progress is made by acts of both evolution and revolution, and for real progress to be made in a short period of time, more acts of revolution will be necessary. History has repeatedly demonstrated that where metrics are linked to executive remuneration, progress on those metrics is made much faster and can also be of a much better quality.

Other respondents had a different point of view saying: “Probably not to metrics. Metrics are poorly understood and need to be set in context. e.g. Closing a factory may reduce its environmental impact but destroy shareholder value. Installing solar panels may reduce both environmental impact and costs. What is "good" also varies with sector and over time” and “I am uncertain how robust ESG-related incentives can be for certain companies. However, I agree there should be something in here connecting ESG KPIs with the company strategy. Incentives would then link to the delivery of the strategy, rather than a specific ESG metric”. One member simply stated: “No. Genuinely think we as a community have lost the plot on this”.

We also asked where governance professionals are leading ESG matters, have you encountered challenges introducing ESG reporting to the board? 52% said no whilst 18% answered yes. One respondent said: “The challenge has been to pull together all of the strands that relate to ESG to get a clear, central view of ESG across the organisation” and another said: “It is difficult at this point to get detailed, trackable measures to report against from the businesses”.

One person said it was “still not high enough on the board agenda” and another said: “Not given enough time on the board’s agenda. Seen as a stand-alone issue rather than linked to the company’s strategy and objectives”. Constructively one respondent said it “can be challenging to make time for this at Board meetings - it is vital that the Company Secretary continues to emphasise the importance of this. Regulation helps!”, however one answer seems to be very telling about the response to leading ESG matters to the board stating: “What is the price of bread to do with this?”

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