Governance (the “G” in “ESG” ) is one of the three key dimensions of the ESG criteria. Its main purpose is to ensure the integrity and long-term sustainability of a company.
In this note, we propose you to think about how Internal Communication can promote a culture of transparency and solid commitment to responsible and ethical business practices.
The key: CEOs committed to ESG criteria
The governance dimension in the ESG criteria refers to how a company or entity is led, managed and supervised. It represents the decision-making structure and how accountability and transparency is ensured in all operations of the organization. This dimension is one of the three areas of consideration in the ESG criteria, along with the environmental (E for Environment) and social (S) dimensions.
Good corporate governance is key to ESG criteria and, above all, to the company’s commitment to comply with them.
A dilemma that generates tensions
In this regard, a recent PWC study on the ESG dilemma for CEOs is very interesting. The study shows that while investors place good corporate governance and the reduction of greenhouse gas emissions among the top five priorities of their companies, 81% indicated that they are not willing to give up more than 1% of their investment returns to make progress in meeting ESG criteria.
Still, the report is hopeful in considering that:
"as they invest in these types of initiatives, they will find a balance between negative market reactions and variations in the value of their shares in the short term."
Key aspects of good ESG governance
The governance dimension in the ESG (Environmental, Social and Governance) criteria refers to how a company manages and oversees its operations, including decision-making, transparency and accountability. Within it, the following dimensions are considered:
1.Structure of the Board of Directors
- Composition, independence and responsibilities
- Evaluation of the mix of independent directors and members of senior management.
2. Executive compensation and accountability
- Establishment and award of salaries and bonuses.
- Alignment of compensation with performance and long-term objectives.
3. Ethics and compliance
- Promoting business ethics and compliance with laws and regulations.
- Preventing unethical or illegal behavior.
4. Transparency and disclosure of information
- Effective communication of relevant information to stakeholders.
- Inclusion of shareholders, investors, employees and the community.
5. Risk management and internal control
- Risk management procedures and systems.
- Asset protection and minimization of operational and financial risks.
6. Diversity and inclusion in senior management
- Representation of diverse groups in high-level positions.
- Promoting diversity in decision making.
7. Shareholder participation and rights
- Involvement of shareholders in key decisions.
- Respect for shareholder rights.
8. Corporate responsibility
- Commitment to corporate social responsibility (CSR).
- Contribution to the welfare of society and the environment.
Internal Communication to Strengthen Governance
Internal Communication (IC) plays a crucial role in strengthening corporate governance. It drives the following aspects:
1. Clarity and exposure
- Clearly and transparently communicate the governance structure.
- Detail key decision makers and oversight processes.
2. Employee participation
Facilitate avenues for the expression of opinions and concerns about governance.
Encourage active participation and feedback.
3. Codes of conduct and ethics
- Ensure that employees are aware of codes of conduct and ethics.
- Maintain an ethical and responsible organizational culture.
4. Training and education
- Provide training on governance and ethics issues.
- Ensure that employees understand and comply with established standards.
5. Communicating policies and procedures
- Inform teams about governance policies and procedures.
- Establish clear procedures for reporting violations or concerns.
6. Whistleblowing Channel
- Establish a secure and confidential channel for reporting unethical behavior.
- Promote the existence of and access to this channel effectively.
7. Inclusion and diversity in governance
- Communicate efforts to promote inclusion and diversity in decision-making.
- Reflect commitment to equality at all levels.
8. Progress reporting and accountability
- Regularly communicate progress on governance, including metrics and results.
- Prepare for accountability to stakeholders.
9. Crisis Communication
- Prepare CI to address governance-related crises in a transparent manner.
- Respond effectively and ethically in difficult situations.
10. Collaboration with other areas
- Collaborate closely with areas such as the legal department.
- Ensure consistent and effective communication on governance issues.
Communication to strengthen
By taking these considerations into account from the Internal Communication area, the company can strengthen its approach to the governance dimension, influence the way a company manages risks, address challenges and seize opportunities in the context of ESG criteria.
Undoubtedly, effective internal communication can contribute to the dilemma posed by the CEO's, since disclosing the strategy, actions and initiatives of the ESG criteria will generate more and more confidence for investors and promote the organizational climate and culture.
