Environmental, social, and governance (ESG) refers to the three key areas that impact an organisation’s long-term performance and success. The “social” or “societal” component of ESG refers to the ways in which a company’s actions and practices impact society and the broader community.

 

What does the social and societal issues entail?

The social and societal considerations form part of ESG and include issues as diverse as diversity and inclusion, labour standards, workers’ rights, fairness and equality, human rights, and community engagement. Concrete examples are gender pay gap, supply-chain labour violations, CEO-to-employee remuneration ratios, the representations of minorities across all layers of your workforce.

 

How can non-executive directors contribute to tackle top social and societal issues?

Environmental, social, and governance (ESG) issues are not treated equally. Social factors lag behind environmental factors. Growing systemic inequities have exposed the importance of the ‘S’ component of ESG.

For non-executive directors, the social component of ESG is relevant in several ways. As members of the board, non-executive directors are responsible for providing independent oversight and guidance to the company, and ensuring that it is operating in the best interests of all stakeholders. This includes ensuring that the company’s practices and policies align with its values and mission, and are having a positive impact on society and the broader community.

Non-executive directors play a key role in identifying and managing social risks and opportunities, and in ensuring that the company takes a responsible and sustainable approach to its operations. The board oversees the development of policies and practices related to diversity and inclusion, labour standards, and community engagement. It also ensures that the company is taking a long-term view of its impact on society and the environment.

 

Deep-dive into payment practices

NEDonBoard has been at the forefront of providing information to non-executive directors on the issue of prompt payment. We are a signatory to the Good Business Pays campaign and have worked with the Small Business Commissioner to raise awareness of late payments as a board matter. Here are a few relevant links to you to review:

• Payment practices: your board responsibilities
• Payment practices are part of your board ESG and culture agenda (interview with the Small Business Commissioner)

 

The social and societal components of ESG are an important area for non-executive directors to consider. It can impact the company’s long-term performance and success, and its relationships with key stakeholders. By taking a proactive and responsible approach to social issues, non-executive directors can help to ensure that the company is able to operate effectively and achieve its goals.

 

Written by Elise Perraud, NEDonBoard COO

 

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