The front line of ESG disclosure: The board’s role

Introduction

Rapidly changing global market trends in technology, the role of business in society, the effects of climate change, and other areas, have a significant impact on value creation. In response to these changes, companies and investors are taking a wider view of the opportunities and risks associated with businesses, particularly those related to the interdependent nature of businesses and the reliance of companies on people and natural resources to sustain and grow their businesses. To make informed decisions and evaluate how companies manage these risks and opportunities, stakeholder demands for more transparent, comparable, and reliable information on companies’ environmental, social, and governance (ESG) risks and performance have never been greater—and the corporate community is taking notice.

The Business Roundtable recently released a statement on corporate purpose,¹ signed by over 180 CEOs who committed to leading their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders. For board members, the statement underscored that directors need to understand the environmental and social impacts on the business strategy and risk profile of the companies they serve. Corporate response to the increasing risks and opportunities that ESG presents, along with the growing market expectation for a better understanding of how ESG protects and drives value for an organization, has already resulted in a dramatic increase in disclosure. As companies continue to navigate this landscape, they will be called upon to provide even greater transparency in response to demands from stakeholder groups such as investors, customers, policy makers and regulators, and employees.

This issue of On the board’s agenda explores developments influencing companies to improve transparency on ESG topics, and to consider the avenue for disclosure to most effectively meet the information needs of investors and other stakeholders.

¹ Business Roundtable, Statement on the Purpose of a Corporation