Ten questions every board director needs to ask about ESG
ESG stands for Environmental, Social and Governance criteria, factors or issues, which are sometimes referred to simply as ESG (“Our organisation is making ESG a priority.”). ESG factors provide a way to measure and report on your organisation’s impact beyond the balance sheet, and you might produce an ESG report or include an ESG page as part of your annual report.
ESG has become a popular reporting method for large companies in recent years. Companies are being judged on their ESG outcomes, not just their financial success. This means that of two similar companies, the one with a strong ESG record is likely to be preferred by many stakeholders.
These 10 questions will help board directors to consider their responsibilities in relation to ESG at their organisation.
To know why you should be asking these questions, download the full document.
1. Is ESG relevant to our organisation? Is the broad range of non-financial factors and issues covered by ESG of interest to your funders and consumers? These issues may include biodiversity, climate change, waste and circular economy, culture, inclusion and safety, modern slavery and the rights of First Nations peoples.
2. What are the issues of most importance to our stakeholders? Have you asked staff, volunteers, beneficiaries and donors what they care most about? Do these concerns align with your work, and if not, how will you resolve any tensions?
3. What do our competitors do? Are you out in front on ESG, or trailing behind?
4. How does our organisation support environmental sustainability? Do your staff, volunteers, board members and beneficiaries feel accountable for their personal impact on the environment? Are your organisation’s policies and practices aligned with ESG? How does your organisation communicate its ESG expectations and requirements, and how does it monitor and report on outcomes?
5. How does our organisation support social impact? Do you have people from diverse backgrounds on your board? Do you have policies in place that ensure inclusion for staff, volunteers and beneficiaries with diverse backgrounds, identities and needs? Where is there opportunity to acknowledge Indigenous culture through language, programs and signage?
6. How does our organisation support good governance? Have you documented the roles, accountabilities and responsibilities of the board, and how they interact with those of staff? Have you ensured transparency regarding these roles to ensure clarity of who is accountable for each part of the organisation? Do you ensure your decisions and finances are documented? Are vulnerable people protected by policies, and is personal data protected?
7. How do we share our ESG impact with others? Does your organisation produce an ESG report, or publish an ESG statement of impact as part of your annual report? Supporting your ESG claims with data helps to demonstrate your integrity. How can data help you to represent what you do in a way that will benefit you financially? Consider your suppliers and how you choose them – is this something you can report on?
8. To what extent do we see our organisation as an ESG leader in the NFP sector and in the wider community? Consider the messages sent by the board and staff body to other staff and stakeholders: do they consistently communicate about ESG? Do individuals feel they have the agency to make choices and have an impact regarding ESG in the organisation?
9. To what extent is our organisational culture aligned with our ESG priorities? Consider the messages sent by the board and staff body to other staff and stakeholders: do they consistently communicate about ESG? Do individuals feel they have the agency to make choices and have an impact regarding ESG in the organisation?
10. What is the role of ESG in our investment choices as an NFP? Whether your organisation is a large investor or a very small one, what do you know about the companies you support with your business and investments? What are their ESG credentials?