ESG: From Afterthought to Strategic Imperative

Listen to Episode 35 on Apple Podcasts

Guest: Helle Bank Jorgensen, founder and CEO of Competent Boards

Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation

In this episode:

1. Don’t get lost in a sea of standards and rankings. Focus in on the most material issues and consider integrated reporting.
2. Be proactive about ESG. Duty of care today involves taking action, not waiting to be activated, says Jorgensen.
3. Expand your ESG view. The intersection of a company’s purpose, values, culture, goals, and actions meet is where “the rubber meets the road.”

Summary

“We may vote against the election of directors where we have concerns that a company might not be dealing with E&S factors appropriately.”

This new addition to BlackRock’s corporate governance and proxy voting guidelines shifts ESG from “an afterthought to a strategic imperative” for boards, says Helle Bank Jorgensen, a globally recognized sustainability, climate change, and ESG expert.

To help board members keep pace, Jorgensen founded Competent Boards to give current and future directors an online platform to learn from global experts and each other. The end goal is for board members to “get the tools to get the insight to get the foresight they need to make better decisions and make their companies more resilient.”

In this episode, podcast co-host Meghan Day talks to Jorgensen about ESG, boards, and expectations today, drawing from Jorgensen’s experience advising companies from Maersk to Unilever, serving as a board facilitator for the UN Global Compact Board Program and serving on the expert panel for His Royal Highness Prince of Wales’ Accounting for Sustainability Project. (“The closest to royalty I’m going to get,” Day jokes.)

Don’t get lost in a sea of standards and rankings.  

Given how multilayered and nuanced ESG has become, these “three little letters encompass so much,” says Day. With the increasing number of ESG standards and frameworks, how can boards deliver the information investors are asking for?

Don’t get lost in endless hours of standards, ratings, and rankings, Jorgensen advises. Board who do risk failure. Rather, focus in on the most material issues, the most pivotal stakeholders, and the resources a company can allocate to actually taking action and making improvements.

Jorgensen also highlights the value of an Integrated Report, an internal and external reporting tool which goes beyond ticking boxes to putting standards and guidelines into strategic context.

“Open the blinds and make sure that you see what is actually material for the organization.”

– Helle Bank Jorgensen, founder and CEO, Competent Boards

Be proactive about ESG.

Companies shouldn’t just address important ESG factors in response to their actions, Jorgensen says. They should proactively investigate how these factors impact the company and how the company impacts the society.

“Duty of care is taking action and not waiting to be activated.”

– Helle Bank Jorgensen, founder and CEO, Competent Boards

Investors are looking for board members to understand sustainability, climate, and other ESG drivers not as an afterthought—when they’re callout out by the media or investor community, for example—but as a strategic imperative, says Jorgensen.

What are the goals the company is committing to? What is the progress on the agreed transition strategy?

That strategy “matters if you want to attract and retain capital, talent, and customers,” Jorgensen says.

Expand your ESG view.

Even though “what gets measured gets managed,” companies should look beyond the data and broaden their view of ESG overall, says Jorgensen.

Companies should consider incentives beyond just financial ones, she says—for instance, incentivizing the right behavior. The culture for supporting such incentives starts at the top, with the board.

Furthermore, Jorgensen says, companies should do a strategic assessment to make sure ESG isn’t just a secondary expectation but is reflected in enterprise risk management systems, approval processes, lobbying, marketing activities in procurement and partner policies, and beyond—in short, embedded in the company’s culture and DNA.

“There is a clear link between the purpose of the company, the values, the culture, the goals, and the actions, and frankly that’s where the rubber hits the road.”

– Helle Bank Jorgensen, founder and CEO, Competent Boards

Also in this episode . . .

Day and Jorgensen also talk about how boards are driving resilience in their companies, seeking out more diverse representation, and prioritizing “care as well as cash” in today’s world.

“The pandemic has shown us that we need to rethink the role of the company in society and therefore also the role of governance,” Jorgensen says.

“Board members all over the world are starting to see we have a role that is bigger than ourselves,” she says. “I think we will see smart and courageous board members taking a stand.”

Resources in this episode

• Competent Boards
• BlackRock Investment Stewardship: Corporate Governance and Proxy Voting Guidelines for U.S. Securities
• “10 Steps Toward Good ESG Governance,” by Helle Bank Jorgensen

Listen to Episode 35 on Apple Podcasts