As companies adopt an expanded view of the constituents they serve, environmental and social issues have gained more prominence on management and board agendas. Stakeholder capitalism has become one of the key concepts guiding how companies and boards view their purpose and responsibilities. Investors, employees, customers and regulators are pressuring companies about their commitments to issues like:
- Climate change
- Pollution and carbon emissions
- Energy efficiency
- Employee wellbeing
This puts pressure on board members to act or risk losing customers, clients and talent. Good governance, then, is critical. Boards, working with management, have to sort through all the noise — opinions, ideas and information — and make rational, informed decisions about how to set priorities, allocate resources and make investments.
We have identified four key issues that are part of a good governance program:
Board governance and effectiveness
How can you develop an effective board with broad skills and the right culture that provides long-term stewardship of all people, risk and capital programs, risks and opportunities?
Sustainable investments
How can you best manage capital to drive improved financial outcomes by integrating sustainability into investment processes, capital allocation, portfolio construction and stewardship?
Risk transfer mitigation
How can you identify, assess, quantify and manage enterprise-wide risks and liabilities through insurance and mitigation strategies?
Disclosures and targets
How can you use metrics, targets and robust governance structures (e.g., executive incentives) to ensure transparency and accountability while responding to regulatory disclosure requirements?
