October 28, 2021

ESG Oversight: Pros & Cons for Common Committee Assignments

This Clermont Partners blog points out that – although there’s a growing expectation among investors that boards will expressly oversee “ESG” risks & opportunities – some companies are facing gridlock & indecision about who gets the assignment.

The blog acknowledges that there’s no one way to approach this. It lays out pros & cons for assigning ESG oversight in full to one of the “regular” standing committees, creating a standalone ESG committee, or involving the full board. For example, here’s what it says about the “full board” approach – which involves dispersing the responsibility for parts of ESG oversight to various committees:

The Pros:

Full board oversight ensures that ESG management will receive a broad and diverse set of perspectives, experiences, and ideas. It also allows for the group to integrate ESG into all board committees in appropriate ways, rather than selecting just one committee to carry the load.

The Cons:

Especially for boards with upward of 10 members, there may simply be too many cooks in the kitchen. A variety of perspectives is helpful, until it begins to meaningfully slow down processes. Full board ownership also can lead to involvement and management that is too strategic and abstract and not rooted in measurable actions for the company.

Along similar lines, this NACD blog discusses how to create a “climate fluent” board. Panelists from a recent NACD summit urged companies to rely not just on one director who is an “expert” but to have a diverse board that’s willing to ask questions and learn. NACD says that “climate governance” means keeping sustainability front of mind during all decisions and is the most reliable way to set and achieve ESG goals.

Liz Dunshee