In Australia, there has historically been a strong focus on issues that are part of the ‘E’ pillar. While these are not to be ignored, directors should be proactive in also considering the varying issues in the ‘S’ and ‘G’ areas.
The growing wave of stakeholder (not just shareholder) focus in ESG, means companies who focus on the matter, will be positioning themselves ahead of their peers. Stakeholders want to know how companies are weighing ESG-related risks and shaping their business strategy accordingly. Investors and financiers in particular, are making capital and debt allocation decisions based on this information.
Some of the world’s largest asset managers have voted against directors at companies that, in their view, lag on ESG. They say identification and management of the ESG issues material to a company are essential to resiliency and risk mitigation, as well as strategy execution. These investors are looking for more disclosures from companies so that they can better assess how the company is addressing ESG risks and opportunities.
As ESG reporting evolves and companies disclose more relating to these issues, the organisation’s ESG metrics will come under increasing scrutiny. Making sure these metrics are prepared with the appropriate rigor for investor use and can hold up to regulatory scrutiny, will be crucial.
ESG issues are relevant to all directors, regardless of the specific board they sit on. As the governance surrounding ESG becomes a greater focus, directors will need to consider how (or should) they assign specific oversight for particular ESG issues to individual committees.
John Tomac
Partner, Sustainability reporting and assurance, PwC Australia
Tel: +61 282 661 330
Adam Cunningham
Partner, Sustainability, Reporting & Assurance, PwC Australia
Tel: +61 3 8603 2759