Environmental, Social, and Governance (ESG) initiatives, strategies, and policies have penetrated nearly every aspect of organizational conversation. Articles, blogs, webinars, and mainstream media have reminded us all of the importance of the development, implementation, and tracking of these initiatives, what they mean, and why they are so critical in today’s competitive sourcing market. Discussions abound regarding climate change and how each organization needs to do their part. And they continue about diversity and inclusion both within organizations and outside of them. Simply, these discussions focus only on the ‘E’ and the ‘S’ of ESG … and so do the discussions in boardrooms. 

Organizations of all sizes have worked diligently on environmental strategies to help with climate control issues, as well as overcoming challenges and identifying solutions surrounding labor rights, supplier diversity, DEI, and creating more inclusive, equitable company cultures. Not only are these initiatives relatable, but they can also be tracked and measured. They “look good” to stakeholders, investors, and customers. And while they are undoubtedly all strides ahead of where we’ve been in the past, aren’t we missing something? Where is the ‘G’ in all this?

What is Governance?

Governance has been somewhat swept aside in all these conversations and subsequent actions. However, with increased accountability demands among organizations large and small, the tides appear to be turning. It’s not that governance has intentionally be ignored, it’s that most people don’t have a good grasp on exactly what it means or how to measure it. Is it internal? Is it external? Is it both? Is it merely governing ESG or is it governing all operational actions? 

While the scope can somewhat vary based on the size and circumstances surrounding the organization, at its core, governance is about greater operational transparency. And ensuring that this transparency is reflective of the company’s values, mission, and vision. It is about all actions both internally and externally. And, maybe most importantly, it’s about accountability. Fundamentally, how can an organization be held to certain standards when those standards don’t exist in the first place? 

The Benefits of a Strong ‘G’ in ESG

Just as with the environmental and social sides of ESG, governance results in numerous benefits to the organization. We’ve compiled a few of them below:

• Raising Capital 

There is strong support of governance by institutional investors. They want to know that a company is regulating its operations and behavior and is accountable to its stakeholders before they invest their time and money in it. According to an article in Harvard Business Review, “By contrast to ‘E’ and ‘S’ proposals … ‘G’ proposals to companies have long garnished strong support by institutional investors. However, impetus for these successful G proposals has had nothing to do with the environment or stakeholders like workers, or issues like gender or racial diversity. Rather, they promoted stockholder primacy by making companies more open to the market for corporate control, by forcing changes in policy at the instance of a momentary stockholder majority, and by aligning company management’s pay to only one constituency — stockholders — by tying it tightly to total stock return.”

 

• Buy-in 

Organizations need buy-in not only from their customers and strategic partners, but also, and perhaps most importantly, from their employees—and governance is an avenue to get there. With standards and metrics in place, it’s easier for these stakeholders to get behind the organization. It simply tends to feel safer and more trustworthy to do so. 

 

• Profitability 

Strong internal governance will increase efficiency, and increased efficiency means lowered risks, elimination of waste, and maximizing opportunities. Combined, these mean more customers and more funding opportunities, increasing profitability.

 

• Accountability 

Corporations can no longer merely say they are taking certain environmental or social actions in order to “look good.” Rather, they need to be able to prove it. For example, we’ve talked previously that the time of empty promises is long gone. Employees and customers demand more. And there is no better way to show that an organization is being accountable to itself and to them than with strong governance.

While many aren’t talking about governance as much as its ‘E’ and ‘S’ counterparts, it is just as, if not more, important. As much time and consideration that goes into the environmental and social components of an ESG policy and strategy must also be spent on governance. Developing the structure, implementation, and identifying proper metrics can take time, but the benefits far outweigh the costs.

At The Win Woman, we focus on Environmental, Social, and Governance strategic development and policies for organizations of all sizes and funding opportunities for nonprofits. We work with boards and C-Suite executives to help develop the right solutions for their specific situation in their specific industry. For more information, please book a call with us. 

 

Until next time, keep Building Your BADASSERY!