The Character of the Corporation: How Can Boards Wrestle the ESG Agenda?
Questions to ask the CEO.
Boards must guide management to frame an agenda for the company to meet its most critical challenges. And that agenda should
• The Character of the Corporation. (Intro) Delaware Supreme Court Chief Justice Leo Strine tells Directors & Boards that it is not “sustainable to have societies where large corporations do not have to align their business practices with the interests of living, breathing human beings who deserve a safe environment, economic security and consumer protection.”
• Profit and Purpose: Indra Nooyi, former PepsiCo chairman, talks about balancing bottom line and societal success.
• ESG Is On Costco's Board Agenda: Chairman Hamilton E. "Tony" James discusses the company's focus on environmental, social, governance issues.
• The Story of "S": What does "social" in ESG encompass? We talk to governance experts about their take.
• Best Buy's Road to Gender Parity in the Boardroom: It's not about tokenism, it's about business strategy and doing the right thing.
• Courageous Boards Can Drive the Profit-People-Planet Agenda: CEO of The B Team talks about the role boards need to play.
• How Can Boards Wrestle the ESG Agenda?Questions to ask the CEO.
• ESG Faces Tests of Staying Power: Will a potential economic downturn, or the ghost of Milton Friedman, dampen the social-purpose movement?
• Stop Fighting ESG: Tips for becoming environmental, social and governance board leaders despite the lack of ESG clarity and standards.
• To Figure out the "S" in ESG, Look Within: Directors need to assess how their core business connects to society.
include consideration of how the company will shape its future environment, including its contribution to meeting society’s most critical challenges.
And yet, few boards (or management teams) are fully prepared to engage in such an expansive and consequential agenda for the good of the company and the good of society.
How can the board effectively wrestle with the ESG agenda? Engage the CEO on these five questions:
• How can our corporate strategy simultaneously deliver on shareholder returns, strengthen the company for the longer term, and create additional value to society that brings new opportunities and rewards to the company?
• What difference is our company making to the Sustainable Development Goals (SDGs)?
• What are the three biggest societal challenges in each key geography that puts our company’s business at risk; that our company could impact through our core business? How do our strategies in those geographies incorporate those societal risks and opportunities?
• How are our largest institutional investors assessing the company’s performance on what they regard as material ESG metrics? How are we assessing our performance and the rate that we are improving? Are we effectively communicating that performance?
• What are we doing to assure that investors, governments and other stakeholders fully recognize the positive societal value that we are creating? How has that translated into a premium in share price, market position or margins, or expanded our rights to operate, improved the loyalty of our customer base or positioned us better with government?
While the above will certainly challenge the board and management, it promises to open up new insight about the business and its potential. In the process, the board can help guide the CEO to make the calls that will build a great company, a great stock, and great societal impact. That is certainly a legacy to make any board proud.
Dave Young is a senior partner and managing director in the social impact practice at the Boston Consulting Group and former COO of World Vision International. Gerry Hansell is a senior partner and managing director in the corporate development and strategy practices at the Boston Consulting Group.