The Board's Role in ESG Implementation: Eight important ways directors can help grow their companies' sustainability programs.

• Author: Poe, Alexandra

Boards are wrestling with evolving global financial reporting standards, regulations affecting other communications and investor expectations about their companies' ESG programs. Each company's ESG challenges and opportunities are different, and each company is likely at a different stage in its ESG program development and implementation.

It is almost impossible to imagine a situation in which ESG has no relevance to a particular company or its board because ESG is an omnibus term that encompasses traditional governance topics, such as executive compensation, employee relations, shareholder proposals, fair employment practices, reputational matters arising from branding and corporate conduct, disclosure practices, and financial and operational risk. It is equally unlikely that all boards will find that every ESG topic is relevant and material. That said, virtually every board is already covering some ESG topics on a regular basis, and they will likely discover other pressing ESG topics.

It remains true that, on a day-to-day basis, company officers and employees are responsible for developing and executing ESG programs. Still, directors have important and necessary roles that are implicated by new ESG regulations and by longstanding principles of corporate governance.

Seek out education. The first duty of directors is to educate themselves, because the focus on ESG risk and reporting is real and maturing. Before deciding where to come out on ESG issues, a board should develop a working understanding of:

* The subject matter ESG covers.

* Existing and prospective sources of regulation of those matters. * The current state of thinking about determining the materiality of ESG risks.

* Distinctions between activities where materiality or some other threshold is relevant.

* How the company's current policies and operations affect those issues.

Directors may also be interested in topics peer and competitor companies address and issues that rating agencies cover. Board education is an ongoing project that can be addressed through presentations by management and/or external consultants.

Boards can also recruit to add experience and diversity. According to The Conference Board ESG Center working group, "The Roles of the Board in the Era of ESG and Stakeholder Capitalism," 54% of S&P 500 company directors and 33% of Russell 3000 company directors have some kind of ESG experience already, though existing expertise concentrates heavily around corporate...