ESG Governance: Board and Management Roles & Responsibilities 

I. Introduction

As with other matters, the role of the board of directors regarding environmental, social, and governance (“ESG”) issues is that of oversight. ESG encompasses a broad set of issues, ranging from human capital and compensation issues, to climate change, deforestation, and water and waste management, to supply chain management. Some of these issues are interrelated, and many are continually evolving.

There is no consensus on the key topics and issues encompassed within each of the “E,” “S,” or “G” categories (in fact, it may be easier to try to identify issues that are NOT encompassed within one or more of those categories). Investors’ and other stakeholders’ views differ widely—and are

changing regularly—with regard to which topics and issues are most important for corporate disclosure and investment purposes. Additionally, the importance of ESG issues may vary significantly depending upon company specifics, including industry, size, geographic scope, business operations, and business model (e.g., franchised vs. not).

As a result of the breadth of issues potentially encompassed within the term “ESG,” company-specific variations, the lack of investor consensus on preferences and priorities, and the continually evolving nature of this area, determining how to effect board oversight of ESG issues and how to develop and implement an effective ESG governance structure can be a challenge. At the same time, ESG issues are discussed in boardrooms with increasing frequency, [1] and many companies are considering enhanced board oversight of, and management responsibility for, business-relevant ESG issues. [2]

This post discusses various approaches to board oversight of ESG issues (Part II) and management implementation of ESG strategy (Part III), accompanied by relevant benchmarking information. [3]

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