ESG – an option or an obligation?

It is becoming more and more evident that the developments which are happening in the Environmental, Social and Governance (ESG) sphere are having a significant impact on companies and businesses and the way in which they are run. A company’s ESG policy is now recognised as crucial regarding a company’s long-term strategy, culture and vision, rather than just financial position.

Having an effective and structured ESG policy in place, which deals with environmental procedures, social diversity and responsibility, and ensures effective corporate governance, is one of the steps that can be taken to improve business reputation, increase customer and employee loyalty and attract investors. The increasing need for an ESG policy within a business was just one of many topics discussed at the 2nd Annual Legal ESG Summit which Holmes attended in October.

CORPORATE GOVERNANCE – THE ‘G’ IN ESG

While the environmental and social elements of ESG are somewhat newer concepts, the importance of effective corporate governance is long acknowledged as a cornerstone of good business practice.

Scandals involving Irish charities in recent years have reinforced the significance of effective corporate governance and highlighted the irreversible consequences, reputational, financial and otherwise, which arise due to poor governance. Holmes recognise that prevention is always better than cure and our corporate governance and compliance team offers clear and practical advice on corporate governance – including designing and implementing policies and formal procedures in accordance with applicable corporate governance rules.

Effective governance must be implemented from the top down. The board of directors of any corporate or public entity has a very significant role in this regard.

In accordance with company law, directors have statutory and fiduciary duties which are owed to the company, its' shareholders and employees. Such duties include a duty to act in good faith, and a duty to exercise care, skill and diligence in company matters, a duty to act honestly and responsibly and in the best interests of the company, breaches of which can result in personal liability for the directors.

However, in parallel with this, it is now more important than ever that the board also take measures to ensure that the affairs of the company are conducted in a transparent and fair way and that consideration is always given to the environment, the broader public sphere, not forgetting customers, clients, and shareholders when making decisions. The new era of corporate governance requires the board and their executive management teams to conduct the affairs of the business with integrity and fairness.

HOLMES CAN HELP!

We recognise that corporate governance is about much more than implementing policies and procedures in the business.

We at Holmes have developed a program which includes a root and branch review of corporate governance within your organisation and facilitates remedial actions from both a legal and a cultural perspective. In partnership with Ingenium, a trusted strategic and learning provider, we offer a client specific governance training program to accelerate insights and awareness on internal governance policies, processes and interventions. Designed through a focused, accessible, affordable board and executive training program to collectively enhance and sustain governance excellence, this supplementary addition to our offering can help new learning and sustain change.

The impact and obligations of ESG in the corporate sphere are continuously evolving with the implementation of various legislative requirements at a national and EU level focusing on environmental, climate change and social influence. Holmes can assist clients in addressing their ESG shortfalls and identifying opportunities for value creation regardless of stage of life cycle.

For guidance on implementing an ESG Policy, please contact our ESG team.