The Society Annual Conference 2023, an event hosted by The Society for Corporate Governance - a national organization comprised of 3,700+ members from every industry across the U.S. - brought together corporate governance professionals to explore a balanced approach to navigating corporate responsibilities and conflicts.
This year’s conference encompassed a diverse array of ESG topics, but we've distilled it down to 8 key takeaways for you. From governance strategies to discussions on evolving ESG reporting standards, these lessons aren't just defining our present — they're actively shaping our future. Join us as we explore the notable highlights from this conference and reflect on how they will inform our path ahead.
1. Safeguard Against Value-Eroding Proposals
SEC Commissioner Mark Uyeda emphasized the importance of preventing value-eroding shareholder proposals for the Commission's success, while acknowledging potential delays in regulatory actions due to a high volume of comments. The contentious issue of scope 3 emissions proposals and concerns about "double counting" may be subject to amendment to avoid litigation, but other elements focusing on risk factors and narrative disclosure are likely to remain. He reaffirmed the SEC’s mission: To protect investors.
2. Step Up Disclosure Practices in Private Companies
Private companies aiming to fulfill their ESG program should prioritize specific deliverables for key stakeholders. This involves disclosing data and showing continuous improvement to address customers' concerns, aligning with established reporting standards for financial stakeholders, preparing for upcoming SEC climate regulations, involving board directors and the management team in ESG strategy development, establishing an ESG team and disclosure committee, and ensuring accountability within the organization for prioritizing ESG, planning, and maintaining data integrity.
3. Address Governance Challenges in Insurance Companies
The governance challenges faced by insurance companies are unique and varied, as there is no universal approach that suits all. Compliance is a complex and pervasive aspect of their operations, with risks affecting boards, committee structures, and reporting. Establishing well-defined board and committee structures, engineering resilient reporting systems, and integrating compliance across all business facets should take center stage. Let insurers like Axa serve as an inspiration, with their integrated and comprehensive ESG strategy covering all operational aspects.
4. Prepare to Inherit the EU's ESG Regulatory Landscape
The EU's ESG regulatory changes have significant implications for companies globally, including many US companies. The complex and demanding nature of these rules introduces compliance, litigation, and reputational risks. To prepare, companies should assess the applicability of emerging EU ESG regulations, evaluate their value chain's compliance, conduct gap analyses, establish robust governance structures, develop action plans, and continuously monitor and update their ESG processes and policies.
5. Prioritize Materiality Assessments
Materiality assessments are becoming increasingly important in crafting a robust ESG program. Regular and comprehensive assessments, intertwined with stakeholder engagement, transparency, and data-driven decision-making, should guide your ESG strategy. A case in point is Unilever, for example, whose biennial comprehensive materiality analysis harmonizes its strategic priorities with those of its stakeholders and the environment.
6. Foster Internal Ownership of ESG Practices
Cross-functional collaboration and internal ownership of ESG practices are not merely advantageous but indispensable. Establishing a diverse internal task force with representation from all business functions is crucial for driving ESG initiatives and ensuring disclosure readiness.
7. Steer Clear of Over-Reliance on Ratings and Rankings
Ratings and rankings should inform, not dictate, your ESG strategy. Striking a well-balanced approach entails prioritizing an internally driven strategy that continually reassesses materiality and stays attuned to industry trends.
8. Prepare for Climate Disclosure and ESG Data Readiness
ESG data readiness and climate disclosures are increasingly at the forefront. Building a well-functioning ESG practice requires establishing a "Central Source of Truth" for ESG data and optimizing data collection. Cross-functional collaboration and support from internal audits are vital for disclosure readiness.
With the rapidly changing ESG landscape, it's crucial for companies to stay ahead of the curve. The discussions at The Society Annual Conference 2023 reaffirmed the enduring relevance of ESG and climate disclosure to corporate governance professionals. We are thrilled to continue advancing this valuable partnership, supporting corporate secretaries, general counsels, outside counsel, and other governance professionals in navigating the ever-evolving challenges and opportunities in the realm of ESG.