Putting ESG at the heart of decision making in the boardroom | Business Post

The world is changing, and changing rapidly, and the importance of sustainable business practices is not to be underestimated. With EU-wide ESG legislation coming into play for many organisations, it’s vital for business leaders at board level to understand the necessity to put sustainability at the heart of their decision-making.

To help directors and senior business leaders understand the various moving parts in the subject of ESG, the Institute of Directors Ireland (IoD Ireland) is offering a short programme titled ‘ESG Fundamentals for Directors’. Now accepting bookings for its autumn intake, the programme consists of four virtual half-day sessions that are practical in nature with the aim of providing participants with a toolkit of knowledge and resources to ensure their organisation is fulfilling its potential in terms of ESG requirements and responsibilities. Interestingly, IoD Ireland was the pioneer of the programme in the IoD family.

The programme is led by Professor Simon Haslam CDir, the IoD’s global programme lead for strategy, and a passionate advocate for sustainability in business practices.

“Increasingly, for many organisations, ESG is now a requirement and you have to demonstrate capability around it. But even if you’re not in that space, it would be a very naïve board of directors that would deny the importance of sustainability in their creation of a value proposition. When you think about what today and tomorrow’s consumers are looking for, there’s a greater likelihood that they are going to favour organisations that operate with a knowledge of the finite resources in the world and try to trade fairly when it comes to their communities of interest.

“In addition, leadership involves taking responsibility and being future-focused; for anybody with a board position, there’s a moral responsibility to lead by example.”

In terms of ESG legislation, in 2023, the Corporate Sustainability Reporting Directive came into force, which requires companies of a certain size to report their impact on people, the environment and sustainability issues such as climate change. From mid-2027 onwards, the EU Corporate Sustainability Due Diligence Directive comes into play; this requires large EU companies and non-EU companies that operate in the EU to adopt a structured and effective due diligence process for human rights and environmental risks and impacts. This means that large companies must identify these risks and take appropriate measures to prevent and remedy such impacts not only in their own organisations but also in their subsidiaries and business partners in their chain of activities.

“All of us are part of an ecosystem,” Haslam commented. “If you’re a smaller organisation and trading with a large one that falls under that spotlight, then it’s highly likely that the larger organisation will have expectations of you as a supplier.

“In addition, we are seeing increasingly the power of collaboration in business. While you may be competing with a company on the high streets, behind the scenes you may be collaborating on an issue to help the industry raise its game.”

Haslam has been involved in the ESG Fundamentals for Directors short programme since its inception a few years ago and says that there is a greater awareness and sense of urgency around the importance of ESG now.

“Much like you would expect everyone at board level to be financially literate, so too would you expect them to have an understanding of ESG issues. It is a shared responsibility at board level, and if you have that literacy, you have the ability to ask the right questions of your organisation at the right time.”

The programme consists of four modules, and each session is accompanied by a practical “to do” checklist, to allow participants return to their companies and apply their learnings in a practical sense. There’s opportunity at each session to report back on their progress and get feedback from both the leaders and from other participants.

“There are a few weeks between in each session to allow participants reflect on the issues and bring these into their workplaces by sharing with colleagues and completing tasks,” said Haslam. “In the first session we cover governance; the next two we split the subject of sustainability into two – the first part covers anything to do with carbon, e.g., greenhouse gases, and the second deals with anything non-carbon, e.g., the circular economy, biodiversity and water. The final session covers the social piece, and looks at various stakeholder groups and how the organisation connects with and responds to them.”

The aim of the programme is for directors and senior business leaders to gain an understanding of what sustainability means for their organisation in the context of director duties and growing ESG requirements, as well as an understanding of the gravity and scope of social responsibilities and strengthen that responsibility to stakeholders.

And, as with every IoD Ireland course, there is ample opportunity for participants to share their own experiences and learn from each other. “Our aim is to create a climate that is stimulating, we want people to learn both from their own reflections and from their peers,” Haslam concluded.