Four key areas for boards to enhance ESG strategies in Singapore
Russell Reynolds Associates explains how sustainability efforts can create commercial value and drive better business.
Singaporean companies are under increasing pressure to expand their sustainability and environmental, social, and governance (ESG) strategies to comply with regulatory requirements and meet societal expectations.
According to Sara Galloway, co-head for global sustainability practice and consultant at Russell Reynolds Associates, boards that look after the interests of company shareholders must work collaboratively with the management to integrate sustainability into long-term business strategy.
Explaining how this works to the Singapore Business Review, Galloway identified four key areas of responsibility for boards with regard to sustainability.
The first is to educate all directors on material ESG risks and opportunities. The second is to integrate ESG risks and objectives into board processes, internal control, and risk management systems. The third is to oversee key ESG risks and opportunities and manage key performance indicators. Lastly, boards must ratify that ESG data provided by management is impacting identified risks and opportunities.
Harping on collaboration between the boards and their executives as essential to achieving successful sustainability efforts, Galloway said, “Everybody must be pulling in the same direction.”
”What we found with ESG and sustainability is that the message from the top is really, really important. And if the board (directors) are not supporting the management and if management (executives) are not singing from the same hymn sheet, you start to get a disconnect, you find that sustainability efforts risk becoming disjointed or unsuccessful,” she pointed out.
This may lead to the risk of being accused of greenwashing. Companies may also lose employees if they feel there is a disconnect between what is being said and what is being done.
To avoid this, sustainability efforts should be core to the corporate strategy and create commercial value.
“There needs to be absolute commercial value, that the value creation of sustainability is really important. So this is a core part of your business and taking your business forward,” Galloway stressed.
Whilst there may be short-term pressures to prioritize business survival, a long-term sustainability strategy that is interwoven into corporate strategy will ultimately make for better business, she added.
In Europe, the authenticity of the value creation proposition puts “people, planet and profit” on the same page whereby companies that do so are “doing well, by doing good.”
“What we’re hearing in Europe is that sustainability right now, for many, many companies is a commercial opportunity... So those companies that are early adopters, and are doing this now are actually benefiting from it. And those that don’t do it will get left behind over time,” said Galloway.
Ultimately, integrating sustainability efforts into corporate strategy is a key component to long-term success of businesses.
