The «G» in ESG: the importance of good governance in corporate sustainability

In the ESG criteria, the letter G stands for good governance in a corporation. These criteria are the main reference employed in socially responsible investing (SRI).

Main good governance criteria to be taken into account

Governance encompasses various corporate aspects that are part of the overall assessment when it comes to ESG reporting. Examples include transparency policies, codes of conduct for employees or a diverse board. In addition, there is an international standard for their application.

1. Establishing rules

Governance can sometimes be hard, but it is necessary for progress. It is about setting rules and following certain processes, adhering to standards and ensuring corporate accountability.

This way of working, with certain constraints, can be the perfect breeding ground for innovation to flourish. Boundaries ensure that all staff maintain structure and consistency in the way they work. In this way, they can be replicated or compared with other plans or strategies for further improvement.

On the sustainability side, a good framework for action is known as IWMS (Integrated Workplace Management Systems). These information systems provide the kind of standards, processes and rules to generate the best results for the environment.

2. The importance of data

Following on from the above, it should not be forgotten that one of the fundamental aspects of the IWMS system is data governance. Because there is no good management without good information. Therefore, these tools are capable of structuring the database, guaranteeing its integrity.

Considering that data is the oil of the 21st century, data management is essential. Another important implementation for governance structures are input restrictions. Their use within an organisation and its transformation should also be controlled. If all these protocols are well applied, it should result in accurate and consistent information that can be used in sales. It is also the best strategy to bring order to a disorganised and dispersed company.

But what kind of data is managed and stored in these systems? From operational and financial details to physical details, about equipment, buildings, units, spaces, etc….  These all form the basis for the improved sustainability within an organisation. In fact, companies already using IWMS systems have a head start in successfully completing such initiatives because they will have up-to-date, accurate and well-maintained data for decision making.

3. Too late to re-engineer a sustainability strategy?

A company may have already started to monitor the management of its environmental impact and use tools to help it do so. In other words, it is not necessary to be in a pre-phase of the project to use information solutions. Moreover, awareness of the strategy’s progress through analysis of the areas of improvement is a wise decision at any stage. Thus, ESG improvements will be the result of such a process.

Company information needs to be organised by different communication systems. In turn, these help to meet processes and maintain quality standards as well as operational excellence. As a result, improvement projects are shaped, tailored to fulfil the needs of the organisation.

For some companies, a reduced environmental impact will be sufficient and they will implement a basic building maintenance programme. Others will be more ambitious and look to upgrade IT equipment. This achieves higher standards of sustainability in their office structure.

Why are the «S» and the «G» confused in sustainability reporting?

According to a BBVA report, up to 90% of investors take ESG criteria into account when making decisions. However, as it is a relatively new concept, many may confuse the terms involved as is the case with G and S.

The concept of corporate governance has been developed at length in this article, but what does the S stand for? It refers to social and relates to the impact a business has on the community in which it operates.

In reality, the criteria seek the same ends, but with different actions. While the G refers to the beginnings of the strategy, the S is more about the real-life consequences of those decisions. The SRI-based investment philosophy integrates all of these criteria and forms the basis for the choice of a particular investment portfolio.

Ultimately, within the ESG criteria for sustainability, G refers to good governance within an organisation. The main aspects are closely related to data and the use of information systems. Care should be taken not to confuse it with the S. When it comes to establishing a tailored roadmap, digitalisation is a suitable strategy, so we encourage you to check how our solutions can be of great help in developing an effective governance strategy for your organisation.

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