Understanding ESG:
Governance Factors


ESG Scope & Impact

Create Value Through Sustainable Governance

Summary


The governance segment of ESG encompasses corporate board and management structures, as well as company policies, standards, information disclosures, auditing and compliance issues. Is the leadership group diverse, accountable, and fairly compensated? Does the company encourage shareholder engagement? Are accounting practices accurate and transparent? Stakeholders want to know that people throughout the company conduct business ethically and responsibly.

 

"Robust governance policies reduce exposure to corruption and mismanagement, while increasing investor trust, consumer confidence, and corporate value."
Dave Costello, P.E.
President, M&H

Governance Themes & Issues

Investors and consumers are increasingly concerned about the integrity of corporate governance and structure. Board diversity, executive wages, financial processes, competitive fairness, and anti-corruption practices are all coming to light as never before.

Good governance and good business go hand in hand. A company that ignores weak spots in governance limits its potential, and in some cases, invites scandal. The potential damage to markets, investors, and workforces can be catastrophic.

Maintaining the balance between responsible governance and healthy profitability requires vigilance with regard to the key themes and issues summarized below.

Corporate Governance

  • Board diversity
  • Executive pay
  • Ownership and control
  • Accounting

Corporate Structure

  • Business ethics
  • Anti-competitive practices
  • Tax transparency
  • Corruption and instability
  • Financial system instability

Impacts on Business

More than ever, the behavior of corporate managers is in the spotlight. Customers, employees, and other stakeholders want to know that leadership is operating within an ethical and responsible framework. Over time, the effects of sustainable governance are especially evident in these areas.

Management Effectiveness

Companies that rank low on governance characteristics are more exposed to mismanagement, scandal, and tarnished reputations. They also are less likely to mitigate risks and capitalize on business opportunities over time.

Workforce Productivity

Diversity pays dividends. Companies that create inclusive workplaces are discovering higher employee commitment, increased productivity, and improved financial performance.

Investor Confidence

From transparent accounting to leadership accountability, high governance scores are a requirement for an increasing number of institutional investors.

The connection between responsible governance, value creation, and risk reduction is clear and increasingly important as cultural and political pressures magnify public scrutiny.

Full-Service Sustainability Consulting

M&H is uniquely qualified to help you manage ESG risks and opportunities, with more than 40 years of consulting experience in a diverse range of disciplines and applications.

If you're ready to discuss your needs, call 281-664-7222 or send a message to sales@mhes.com.