The Rise of ESG: Integrating Environmental, Social, and Governance Factors in Board Decision-Making

Business leaders face mounting pressure to integrate environmental, social, and governance practices into their organizations. Veteran CEOs and start-up entrepreneurs alike may feel an obligation to implement ESG initiatives as they aim to practice responsible leadership. Their own values, guiding principles, and sense of duty can steer ESG decisions.

Additionally, consumers and employees overwhelmingly want corporations to care about ESG issues. In fact, 83 percent of consumers think companies should be actively shaping ESG best practices, and 86 percent of employees prefer to support or work for companies that care about the same issues they do, according to research from PwC.

It may be the right thing to do, but incorporating ESG initiatives into your business is not always easy. If you feel pressure, turn to your board of directors. By integrating ESG factors into board decision-making, you can seamlessly embed ESG efforts into all aspects of your business.


Be Innovative and Confident

Innovation and ESG go hand-in-hand. Empower your board of directors to prioritize ESG in innovation decisions. You want to infuse ESG initiatives into organic innovation around processes, products, and strategies in your business, but I’d also encourage you to challenge your board—and your employees—to explore ESG factors in terms of what your organization can do that others can’t.

There’s merit in ESG initiatives for their own sake, but I challenge businesses to take it a step further. Use ESG factors to drive innovation. Take Tesla’s commitment to electric vehicles. It’s a no-brainer that EVs are better for the environment than gas vehicles—an ESG win—but if not for Tesla’s innovation and mission to make EVs more commonplace, the car industry would not be where it is today. Encourage your board to uncover ways ESG factors can drive your business forward.


Be Strategic and Smart

A high-performing board of directors responsibly guides the strategic vision for an organization. Make sure your board incorporates ESG efforts in your company’s long-term strategic plan. Successful ESG efforts are not “one and done.” Rather, they’re best executed as priorities embedded in your organization’s goals.

Strategic thinking about ESG factors requires you and your board to focus on what’s relevant to your organization. Choose ESG priorities based on their natural fit with your brand, your industry, and your mission. Consider where you can make the greatest impact and your available resources. A manufacturing company and a service company are going to have very different ESG efforts. Your board may consider how your organization can address the ESG issues that matter most to the public, but always align your efforts with your company’s core values. Simply put, your ESG initiatives should make sense.


Be Responsible and Ethical

Being responsible and ethical means aligning your ESG initiatives with your morals and company values. Consider how your obligation to corporate social responsibility fits into the big issues the world faces today—and how you personally feel about your efforts.

One of the biggest challenges with ESG is the prevalence of irresponsible behavior. Some company leaders just don’t care. What do you do when some people are invested and others aren’t? Keep in mind that another company’s choice to disregard ESG best practices doesn’t make the behavior acceptable or appropriate for your company. Include ESG factors in your board’s decision-making matrix to better equip them to make ethical decisions.

Competitive advantages and disadvantages also come into play with ESG initiatives. What do you do if your competitors are acting irresponsibly to their own advantage? What if an ESG initiative requires significant resources or time? Morally, you may know the right thing to do, but is it responsible from a business perspective? In these instances, you have to rely on your “why,” your board, and your values.


Do Your Part

No matter the size of your business or the power of your board of directors, nobody is going to change the world alone. ESG efforts require everyone to do their part. Your contribution may feel insignificant, especially in comparison to the scope of the issue, but everyone can make a difference in their own way.

By prioritizing ESG factors at the board level and empowering your board to incorporate ESG considerations in decision-making, you’ll position your organization to have a positive impact. And when everyone does that, it adds up to significant changes.


Questions to Consider

  1. How do ESG initiatives fit into your long-term business strategy?
  2. Does your board of directors hold your business accountable on these issues?
  3. What are the top two ways your organization addresses ESG issues?

If you want to discuss how to integrate ESG initiatives into your business, contact me. I’d love to help you position your board and your organization for success.