Transcript | ESG from a Legal Perspective – with Dennis Kerrigan and Rich Cohen

Hello, this is Kevin Donahue, welcoming you to a new edition of Board Perspectives. In this episode, we are focusing on ESG from a legal perspective. Alyse Mauro Mason, an associate director with the ESG group of Protiviti, interviews Rich Cohen, a managing director with Protiviti’s legal consulting practice, and Dennis Kerrigan, executive vice president and general counsel for the Hanover Insurance Group. Let’s go to their conversation.

Welcome to the Board Perspectives podcast, brought to you by Protiviti, a global consulting firm where we explore numerous challenges and areas of interest for boards of directors around the world. I’m Alyse Mauro Mason, an associate director of ESG at Protiviti. I’m joined today by my colleague Rich Cohen, who is a managing director in our Legal Consulting practice, and we are delighted to be joined by our special guest, Dennis Kerrigan, the executive vice president and general counsel of the Hanover Insurance Group. Today, we’re going to discuss ESG — environmental, social, governance — from a legal perspective. Rich and Dennis are both lawyers joining us today in their personal capacity to share their expertise and insights with us and are not providing legal advice. Thank you both for joining us here today.

Thank you, Alyse.

Great to be here.

I’m going to welcome Dennis to Board Perspectives. The ESG journey is different for almost all sustainability leaders. Would you mind sharing how your path led to this very moment joining this discussion today?

I’m delighted to be here, and delighted to share my personal views. Everything I’m going to express today are my own views. I came to this spot in a couple of different ways. First, if you start with the personal lens, I, like many leaders today, want to work for a values-based organisation, a company with a strong culture, a company that cares about the communities in which it lives and works, and so, from a personal perspective, I’ve always had an interest in many of the topics that fall under the broad aegis of ESG. From a professional perspective, the general counsel’s office is often a natural focus point of ESG efforts. That’s due in no small measure to the fact that the G in ESG stands for governance, but more importantly, the legal function is often the enterprise integrator on many initiatives.

There are very few departments that bring together the business side, the support side and the corporate functions. My team in particular, we work with everyone from business leaders to the field leadership that’s out helping sell our products to the corporate functions like finance and HR. And as you look at what falls under the rubric of ESG, many of those functions, many of the business leaders, are playing an integral role in the development of a company’s ESG strategy and execution. Both personally and professionally, those have been some of the catalysts that have brought me here, and at least in my organisation, I was charged with helping us develop our ESG framework, which I’m delighted to talk about as we move forward.

Thank you for sharing that background with us. What an exciting journey for you personally and the Hanover Insurance Group, and it’s a great transition into something that our listeners are wondering about. In a few words, what is ESG, and why is everybody talking about it?

At its most basic level, it is environmental, social and governance factors. The challenge has be twofold these days. One, is it is something different to each organisation. Whether you go through, say, MSCI, which is an outside firm that has various pillars, identifies it by topics. You can also look at it through the stakeholder lens, which is both an internal lens — your employees — and an external lens: your regulators, your shareholders. It, unfortunately, doesn’t lend itself to one definition.

The other challenge is that it’s been politicised of late, and that’s somewhat unfair, because if you boil it down to me — and this is the way I’ve taken it through my organisation, to our board, to our employees, to our shareholders — you can think about ESG as a series of factors or issues that help drive sustainability. I use the term sustainability in the broadest sense — not just in the environmental sense but also in terms of your balance sheets, in terms of your brand, in terms of your reputation, in terms of human capital: Are you going to be an employer of choice? How are you going to attract and retain the best in your industry? When you look at ESG in its broadest sense and you think about those factors that are going to make your sustainable, that removes the politics and some of the ambiguity.

When you remove that politicised version of ESG, it becomes mission-driven, it becomes mission-critical, and it sounds like that’s what you are doing at the Hanover Insurance Group. From that legal perspective, that legal lens, that were talking about, what are some of the current litigation and enforcement trends you’re seeing currently in ESG?

The most prominent among them, at least for a publicly traded company like ours — we’re one of the oldest members of the new York Stock Exchange, and we also operate in a heavily regulated industry; insurance is primarily regulated at the state level, both from a market-conduct perspective as well as from a prudential perspective, depending on where your entities are domesticated — for us, chief among the regulatory trends, they fall within the NAIC, which is the broad organisation of insurance regulators, as well as the SEC.

In March 2021, the SEC launched its Climate and ESG Task Force within the division of enforcement. Now, that was a pretty monumental shift in enforcement focus for the SEC, which is always focused on making sure that investors have accurate information vis-à-vis public companies, but what they’ve done here in creating this task force is seek to proactively identify ESG-related misconduct, which is consistent with increased investor reliance on climate- and ESG-related disclosures and investments. This task force has been quite active over the last year and a half, looking at investment managers as well as other companies and focusing on the accuracy of their ESG-related disclosures.

That accuracy part, does that also play a part in the accountability measures? Are these regulatory bodies adding and enhancing that accountability factor for companies, whether they’re public or private?

They are. Public companies have always had a very high bar in terms of the accuracy of their disclosures. What we saw for a period of time was, particularly on the investment-management side, the number of investment managers coming out with more funds focused on ESG-related issues — more climate-friendly investments for investors who want to put their dollars consistent with their values. What we still face, though, is a lot of ambiguity in terms of ESG measures.

There are a number of voluntary reporting frameworks out there — a veritable alphabet soup — from the TCFT to the GRI to SASB to the CDP, the Carbon Disclosure Project. A number of institutional investors have advanced one framework over another, but the hope is that, whether you’re a public or a private company, over time, there’s going to be convergence on these reporting frameworks, and then you overlay that with the SEC’s 200-plus-page Climate Change Disclosure Proposal, for which the comment period recently expired. They received more than 14,000 comments on that proposal alone, and that obviously focuses just on the climate part of ESG. Particularly, public issuers still face a lot of challenges in terms of the disclosures and figuring out, what framework do they want to adopt, and what meaningful metrics do they want to follow?

Even if a company follows some of that guidance, whether it’s aligning with the framework or supporting and following the SEC rules and regulations or the NAIC, these enforcement actions that keep coming out have a common theme around greenwashing. Can you briefly describe what greenwashing is, and why this is so common and why it’s becoming more relevant in enforcement actions?

Greenwashing is a broad term to me, particularly in the public-issuer sense and in the investment-management sense. From an SEC perspective as well, what they’re focusing on is unsubstantiated or inaccurate claims that are designed to deceive consumers, investors and others that a particular product or investment is environmentally friendly or has other positive impact on the environment or has some other ESG factor that’s emblematic of the investment.

Greenwashing was originally defined as part of that environmental pillar. Do you think it’s expanded now to include also the social and the governance aspect of ESG?

Absolutely, particularly when you get into the investment-management world, where there are a number of funds out there, ETFs, etc., prospectuses. You can read through their outlines, their philosophies and some of the social issues. Governance issues are always table stakes for a solid investment, but, yes, it’s clearly expanding. I want to caution folks that focusing on the disclosure piece is just one piece of the puzzle, and in some ways it’s the tail wagging the dog: If you don’t have an effective ESG framework to start with by which you’re governing your ESG-related activities — if you don’t have a strategy, a holistic one that goes across the E, the S and the G — the disclosures are going to be ineffective regardless.

It’s great piece of advice. To tie up this part of our discussion, what are some lessons learned that you’re seeing in the market and/or with peers, or lessons learned that you have personally experienced at the Hanover Group?

First, develop a framework by which to attack these issues. If you think about the many component parts that can fall under ESG, first, you have to look at your organisation and its core activities. If you’re involved in the fossil fuel industry or mining or manufacturing, some of your ESG-related issues may be different than if you’re in insurance or financial services. It’s figuring out, what are those issues that are core to your ESG strategy? Then you also have to map it to your governance, and in the public company environment, that involves your board typically coordinating with your nominating and corporate governance committee to make sure that those issues are appropriately mapped to the board and to committees, and one of the new phenomena we’ve seen these days is certain boards setting up ESG-related committees.

But, again, that has to be tied into the company’s business activities, much like when you see a company set up a health and safety committee if they’re involved in industrial activities such as mining or manufacturing. Again, for certain companies, they may want to set up a sustainability committee within their board framework. You have to do that mapping exercise to make sure that the issues are appropriately governed at the board level so they’re providing effective oversight and governance, but then you have to look at your organisation itself from a management perspective, and that’s the hard work of where those issues are going to sit, who’s going to own them — topics like diversity, equity and inclusion. Typically, you’d want someone in HR helping to drive that through the organisation.

From our perspective, we formed an ESG council two years ago with the support of our board where we brought together a group of leaders from corporate functions and the business to talk about ESG issues, develop a strategy and then move forward, because you can’t boil the ocean. You really have to think about those issues that are most impactful to your organisation. You can’t also lose sight of your employee base and what matters to them.

We’ve been fortunate at Hanover that we’ve had a grassroots effort to focus on environmental issues and sustainability. We call them the Green Team, and we have several hundred members now. Just like you set up employee advisory groups on a variety of topics, here, we’ve set up one with grassroots energy and enthusiasm to talk about issues related to the environment and sustainability. Part of it is education, but part of it is also action — translating that into your community-engagement activities, doing environmentally friendly projects. If you want to attract multiple generations of workers, if you want to attract folks who want to join a values-based organisation, you not only need to talk the talk, you also need to walk the walk.

That was so beautifully said. There’s the framework, the materiality, internal and external. There’s monitoring, measuring and then reporting, and then that board oversight. You touched on so many important aspects of developing an ESG programme. You also mentioned grassroots. Most things start as grassroots, and then they develop into a full-blown business unit within your organisation. Whether it’s at Hanover or with your peers, what does that timeline look like? ESG can be overwhelming to people, and they think, “This is going to take five years to build out.” In your experience, what have you seen from a timeline perspective?

It does take time. It sounds clichéd that is a journey, but it truly is, in large measure because ESG factors are evolving as well. If you look at an industry like insurance, for us, climate change is a very significant issue. There’s no doubt that weather severity is increasing. Our customers count on us to help them better understand their risks. We have to be up-to-date on that from a risk perspective as well. We have to ensure that our balance sheet can withstand the changes that are happening in the natural environment.

That’s why you see a lot of insurers now focusing on the issues of climate change, changing weather patterns, severe weather, increasing volatility of weather as well. The better companies translate that risk analysis and that risk mitigation into an actual concept known as resilience by making sure not only that your balance sheet is resilient to withstand that but also that your customers are building resilience, and that is the next gear that a lot of companies should be seeking — to make sure that their customers are resilient as well. The best thing in the world is to have a customer that actually can withstand severe weather, a customer that understands the risks and puts mitigating actions into place.

What I’m hearing from you is that ESG factors and risks are table stakes. Is that right?

Absolutely.

Thank you, Dennis. I’m going to invite Rich onto the microphone. How do you think companies can avoid greenwashing claims and enforcement actions, based on everything that Dennis just mentioned and what we’re seeing in the market?

The gateway is to take ESG seriously within the organisation. You’ve got to educate your employees on the importance of ESG and educate them as to what greenwashing is. You need to tell them the good that comes from ESG compliance. Every little bit of good does a lot of a greater whole contribution. It’ll make a bigger, better company. You also need to tell them about other companies that have fallen short and the consequences that have occurred.

I’m reminded of a conversation I once had with an SEC regulator who told me when they are looking at companies’ compliance with certain initiatives, they look at three things: the tone at the top, the mood in the middle and the buzz at the bottom. You need to make sure that there’s good alignment within the organisation, that everybody understands the importance of ESG, understands the consequences of doing something wrong when it comes to these very important areas.

It’s often been said that a single lie can erase a hundred truths, and for corporations today, the fact that social media is so prevalent and messages will get out very quickly, anybody who goes and misstates something in the ESG context will find themselves getting a greater harm to the company than they otherwise thought of. You also need to have both qualitative and quantitative measures and reporting on ESG metrics that could be looked at and monitored to make sure that you are in fact doing what you said you were going to do. Those contribute to making sure that you can avoid greenwashing claims and enforcement actions.

Thank you so much, Rich, for that. When you talk about misstates, is that evidence-lacking statements? Is that misleading statements? What’s a good example of what that could look like for a company?

Unfortunately, it’s a rainbow of all of those things. It could be marketing messages that are exaggerating efforts — for example, “Made up of 100% recyclable materials” when, in fact, it isn’t made of 100% recyclable materials. You can say that you are doing an evaluation of investment based on carbon footprints before you invest, but if you’re not doing that, that’s a problem. And of course you can manipulate data to get a desired result. We all are aware of the famous case in the mid-2010s — in 2015, Volkswagen, with the diesel emissions, where there was an alleged attempt to distort data to show that they were more environmentally friendly. So, these are examples of things that could happen, and employees are demanding, stakeholders are demanding, more transparency, and you have to deliver it.

That’s a great segue. You mentioned social media — this access to information at our fingertips at all times. We’re seeing that employee-driven demand in transparency and accountability. They’re also excited to talk about ESG and to talk about the things that their companies are doing. Can employees contribute to company greenwashing, and, if so, what are a few examples of what that might look like?

Employees are where the rubber hits the road. They’re the ones who are integrating with the stakeholders in many instances: your customers or clients, your other employee groups, your investor groups, and of course regulators at a certain level, and the consuming public. It’s important that they’re very clear and unambiguous in statements that they’re making to those constituencies that are factual, that support the values that the company is trying to establish, that are provable so that these aren’t just marketing efforts or broad statements that are going to lead to undesirable results.

Part of that is education, right? Do you support having more education programmes inside of a company so that there is a bigger awareness and understanding of what ESG is, the potential risk- and compliance-type issues? How would you advise a board on what that might look like inside of a company?

It’s different levels of education for different groups. Certainly, the board should have a regular session with ESG experts to advise them as to what current regulations are, what upcoming regulations may be, what the things are that they can do to support the company’s efforts to be viewed as a responsible ESG citizen. On the employee level, the education goes to, again, those same broad strokes. There’s a good story to be told there, and I think you start out with the old Bob Dylan song “The Times They Are A-Changin’.” The times have changed. For the companies to move forward to be successful, they have to adapt to the new standards and expectations of the constituent groups that they serve.

Rich is spot-on there, and it ties to one of his previous comments about tone at the top. You have to start at the highest levels of the organisation to talk about ESG in an authentic way that’s relevant to the organisation. I chair our ESG council, and I’ve been on a bit of a speaking circuit this year, speaking at our all-employee meeting, at our senior leadership team meetings, at business-unit leadership meetings, at meetings of our green team, talking about ESG and what it means to the organisation — in part to demystify it, but, in large measure, to explain to them where are focus is, why we’re approaching the issues in the way in which we are, and to get their feedback.

As I said at the outset, this can be a talent-differentiating point in many organisations. There are plenty of statistics out there on why people join organisations today. A lot of it has to do with values and culture, and what you don’t want to do is have some bromides on your website about certain commitments, and then they join the organisation and they realise that you’re just paying lip service to it. Employees want to see, when companies say they’re committed to sustainability, they’re committed to DEI, they want to hear about that from their senior leadership and hear about the steps that the company is taking to advance those efforts.

Going back to the SEC, they have a tagline: “Say what you mean, and mean what you say.” It’s so important to stand by that, because if you’re going to put something out in the public eye, whether it’s internal, external, people absorb that, and they’re going to want to share it. It’s not just a one-off.

Going back to that social media, it’s at everybody’s fingertips. One forward, one retweet, one reshare can be thousands, millions, of eyeballs, and, with any content, it’s important to have that legal lens look at it, your internal committees look at it, finance look at it so that there is this holistic approach to the content that you’re putting out there from an ESG perspective to limit some of those potential risks.

Also, it’s not just what you’re putting out there. It’s really important to have a social media strategy to begin with, monitoring what’s said about you. Today, websites like Glassdoor are important to prospective employees. A lot of people will check Glassdoor, monitor Twitter and other social media channels, for what’s being said about you, and having a response strategy if you find those statements to be inaccurate is really important as well.

That’s a great point, Dennis. You mentioned focus and getting feedback from those internal stakeholders. In your experience over the last few years, as you’ve been building this out, if you wouldn’t mind sharing, what are some of the blockers — that resistance that people skeptical about ESG might ask you, or might raise their hand to learn more about?

Certainly, there is some overpoliticisation of the phrase ESG. It’s shifting the language from ESG. We prefer sustainability. Even though I chair our ESG council, it’s focusing on the sustainability of your organisation, as I said at the outset: the balance sheet, your environmental practices, your human capital practices, protecting your brand and reputation. It’s shifting the discussion to what really matters to the organisation, and its sustainability over the long term to deliver shareholder value, at least for us as a public company. That’s what it’s all about — to do that in a responsible way.

Over time, too, it is shifting the dialogue away from overpoliticisation of these factors and talking about those core issues, because it’s hard to argue with the proposition that you want to enhance the communities in which you live and work. You want to deliver shareholder value over the longer term. That’s key to removing some of those blockers.

As you were talking, I was thinking about, there’s the letter of the law, and then there’s the spirit of the law. Does that translate at all in ESG?

It does because, unfortunately, there isn’t a lot of law out there other than the law governing that disclosures have to be accurate, etc. Unless and until the SEC enacts its Climate Change Disclosure Proposal, you’re still dealing with a number of voluntary frameworks, so it’s about looking at those frameworks, figuring out which works for you and your set of stakeholders. But then, as you’re putting together your disclosures, I think as you said, “Say what you mean, and mean what you say.” You also have to put some assurance work around what you’re saying is accurate. Don’t just rely on your internal voices. You’ve got to use your assurance providers, such as your audit team, your external auditors, and external advisers such as your firm, to get that expert advice, kicking the tires on what you’re saying and how you are saying it.

By doing those checks and balances within your organisation, you’re setting yourself up for less potential exposure to risk, and you have the right processes in place to mitigate potentially getting that enforcement action. What I’m hearing from you is that it’s important to have multiple business units — a top-down, bottom-up approach to ESG.

Yes, and corporate-support units as well: You need finance at the table. You need your enterprise risk management department at the table. They’ve been a great partner with our legal team in terms of identifying the risks, particularly from climate change, that you have to take into account. We want to make sure that we’re disclosing that enterprise risk management framework in an accurate way.

Obviously, the human resources department is important when you talk about your diversity and inclusion statistics, your approach to talent management; it’s important to have them at the table as well. Your marketing department — they’re often the last mile when it comes to your consumer-oriented disclosures, making sure they understand what we can and can’t say and the appropriate ways to say it so that you’re mitigating risk and ensuring that what you’re saying is truthful and accurate.

We’re having this great discussion today, and a lot of these topics can scare people. There’s a fear-based component to getting an enforcement action or making sure you have the right processes in place. Rich, I want to ask you, what are some of the ways that Protiviti, from a legal and an SG perspective, can partner with companies to help them through this journey? As Dennis mentioned, it really is a journey. This is not something that happens overnight.

Right. It is a process, not an event. Our subject-matter experts are ready to assist corporate clients in moving from the theoretical to the practical. It’s helping them get an aligned strategy so that everyone within the organisation, from the highest levels to the lowest-performing level, needs to be integrated and aligned.

As the old saying says, “If you don’t know where you’re going, all roads will take you there.” You need to have a pathway to what success is, and that’s where Protiviti can help: a holistic review of the ESGF efforts within an organisation, what you’re doing, for whom you’re doing it, how you’re doing it — basically, deconstructing the business, the component parts of the business, and looking at how each one of them interrelates with the other and how they help stakeholders achieve the goals that are set out by the company to achieve.

We help look at regulations — both the existing ones and emerging ones — to help them get set up for success, making sure policies, processes, procedures an supporting technologies are all aligned to drive that success. We’ll also help identify those metrics and KPIs to make sure performance is appropriate that could be measured — the things that you want to measure that are accurate, truthful and defensible.

It’s our job to assist you achieving the success that you want to achieve. That’s having a culture of sustainability, value-chain enhancement, a good people experience, as Dennis said — retaining and attracting employees that you want to get, and making sure that you’re protecting customer and employee data in the way that you need to do it. We are a one-stop shop, and we help in that journey and help companies succeed.

Thank you, Rich. Dennis, to shift gears, I’ve heard the following statement a lot recently: “If we disclose nothing or the bare minimum, then we will not open ourselves up to risk.” What is your reaction to that?

There is some truth to it, but for, particularly, a publicly traded company these days, I don’t know how you can attract investor support, attract talent in the industry, attract senior management. As I said, people want to work for values-based organisations that have strong cultures. I don’t see how, in this day and age, you can get away with disclosing nothing or the bare minimum. Indeed, even the bare minimum is still pretty extensive. It’s almost tables stakes today that you’re going to have to disclose some of the more significant elements of ESG. Again, doing that analysis on what is relevant to your industry, to your organisation, to your business activities, is really important.

In practice, to be accountable, you also have to be transparent. That statement that I read about “if we disclosed nothing or the bare minimum,” is that a root cause for enforcement actions, or is it that evidence-lacking approach to what’s being disclosed? There’s a disconnect between transparency and “I might get in trouble.”

I understand that, but, again, in the public-company environment, the proxy advisory firms are not going to recommend to their clients, the institutional-investor community, that they support your board candidates or your other proxy proposals unless you have disclosures. I just don’t see how a public company today could get away with not disclosing some of the more significant aspects of ESG.

What about from the private-company lens?

The private-company lens is a little different, but they’re still in the market for capital. They still need investment capital to succeed. They still need talent in order to operate. I don’t know how they could get away with it as well without having to disclose some of these issues. If you want to attract the top talent in your various industries, you’re going to have to have some disclosure and some transparency around how you address many of these issues.

You mentioned table stakes a few times, it’s not just talent. It’s the top customers.

Absolutely. Particularly in the B2B environment, you’re hearing from many more business organisations wanting to know about companies’ strategies around ESG. From a consumer perspective, look at household retail goods — how many companies today tout their sustainability efforts or how they’re environmentally friendly. That’s an important stakeholder group that has to be taken into account as well.

I would love to hear from both Rich and Dennis on what individual board members should be most concerned about when thinking about greenwashing and legal risks within ESG. I’m going to open up to Dennis first.

As a board member, there are two or three key things to keep in mind: One is making sure that management has a framework by which they’re addressing these issues. Certainly, addressing those issues is not the same as having a strategy around them, so that would be the next evolution. You want to make sure, obviously, that you as a board member and the board as a whole, have effective governance and oversight over these issues.

Many of these topics are already covered, like human capital. Diversity, equity and inclusion typically would fall within a human capital committee or a compensation and human capital committee, so that mapping is typically already there. From a risk perspective, typically, the audit committee is charged with addressing risk — it’s important for audit committees to think about risks in the area of ESG.

For an insurer, that’s often climate change and increasing weather severity, but it can vary. For manufacturing and industrial companies, health and safety is key. For a fossil fuel company, sustainability. The transition away from fossil fuels to something, that needs to be addressed. From a board member perspective, it depends on which committees are you sitting on, then, from an overall perspective, particularly if you’re on a nominating and corporate-governance committee, ensuring that the issues are appropriately mapped to the various board committees.

So, ESG is personalised. It means something different to every company, and, yes, there are frameworks and there are rules and regulations to follow, but is there a one-size-fits-all approach to ESG?

I would say no, but I welcome Rich’s perspective.

I agree with you on this, Dennis. It’s not one-size-fits-all. It’s important that companies get started to do something — identify what they want to do and then do it. It depends on your industry. It depends on your geography. It depends on your stakeholders. And it depends on the kind of company that you want to be.

Nor is the methodology one-size-fits-all either. As I mentioned at the outset, it’s helpful to look at these issues through two lenses: First, there’s the issue lens — and you can use things like the MSCI, ESG pillars that have a laundry list of issues that fall under the E, the S and the G. But then there’s the stakeholder lens, as Rich mentioned: your internal stakeholders — your employees, your senior management, your board, making sure that you’re hearing from them on what matters to them.

That external-stakeholder environment can be quite vast, particularly for a heavily regulated industry like insurance, but also for publicly traded companies: the SEC, the NAIC, the voluntary-reporting frameworks, your investors, the institutional investment management firms, the proxy advisory firms. There’s a whole landscape out there of external stakeholders that have to be taken into account as you work through these issues. The better companies are not just taking an issue-by-issue approach; they’re overlaying the stakeholder lens on top of that.

Rich, from sitting around the boardroom table and being that individual board member, why is it so important to be a supporter versus a blocker in those investment-approval decisions when it comes to ESG? When it’s a line item, there can be that blocker, so as a board member, why is it important to support those investments?

It’s a process, not an event, again. It’s about educating the board as to the importance of the initiatives, on how it interacts with the value of the business, both economically and socially, and how to drive that business forward so that it creates a culture of accountability as well as a culture of compliance, as well as the culture of social good. You want to have a board supporting relevant investment approvals for optimising and enhancing ESG efforts. That could be including hiring a full-time sustainability leader that reports to the C-suite. These are very important things for the board to do.

Again, it’s going to be a process, not a onetime thing. In addition, it’s important that going forward, boards look at ESG compliance and initiatives in a fashion similar to how they look at financials. This should be something on their agenda at every meeting: How are we doing? What are the metrics showing? Where are we falling short? What do we need to be doing differently to achieve the goals that we want to?

Finally, an additional consideration, as something that I’m seeing more and more companies have their boards embrace, is creating a compensation programme that rewards ESG progress — having part of the incentive compensation of the senior leadership be measured according to ESG initiatives.

Those are the things that the board should be doing. Those are the things that forward-thinking boards are doing. Again, this is nothing new for boards. Boards always face challenges, and it’s about addressing those challenges head-on and achieving the same end through different means that works the best way for their companies.

It’s not always a positive thing to get universal board support of any initiative. The board is there to provide governance and oversight, and often challenge, and if you’ve built a diverse and inclusive board that brings a broad set of experiences to the table, you will get that challenge, which is good. You don’t want a board of people just from your industry or just from a particular discipline. You want that broad set of experiences so that they are offering that challenge.

Also, there are organisations that have hired chief sustainability officers or heads of ESG. That’s often a good approach depending on the organisation, their business activities, their business philosophy, etc., but you have to be careful in some instances that the task of addressing ESG isn’t insourced just to that person. I look at an issue like inclusion and diversity. That’s just not an issue for HR to address. It has to be embedded in every senior leader. It’s a topic where everyone has to live that every day. The same is true for ESG.

Now, I’m the head of our ESG council. I do have a full-time project manager who’s terrific and helps me drive some of these initiatives forward, but one of the things that has been the hallmark of our approach is that it’s owned in the individual business units and corporate support units as well: Risk plays a very important role. HR plays very important role. The business plays a very important role — finance, investor relations. All are key constituencies that have to be united and understand that this is not something that we’re just insourcing to a head of ESG, but it’s something that we have to take into account as we’re operating day-to-day.

One thing that I’ve been thinking about recently is, I’ve never heard a CFO say, “This number is close enough.” Why are we doing that with ESG? There should be the same levels of controls in place for ESG metrics as for financial disclosures and financial metrics. I encourage all board members to hold ESG metrics to that same accountability measure.

Dennis, what are three key takeaways you want our audience members to remember from this discussion today?

Doing that analysis that’s authentic and relevant to your business activities using both the stakeholder lens and the issue lens would be one. Two would be creating a framework, taking that holistic approach, bringing all of your internal functions and key leaders together to develop that holistic approach, which, hopefully, will translate into an ESG strategy. Third is, obviously, communication and transparency in your ESG efforts not just to the external market, to the investor community, but also to your employees. But don’t let the disclosures and the transparency piece be the tail that wags the dog. Don’t start with that. Start with your approach, your framework and your strategy, and then the disclosure should naturally follow from there.

Thank you both for joining us today and sharing your insights with us. We’ve covered a lot. It’s been a great discussion.

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