This post was written following an interview with 3 time Chief People Officer Chris Galy. It is the second in a series of posts based on my interview with him. The first: “Best Investment for an HR Budget” is here.
Environmental, social, and governance (ESG) factors are becoming increasingly important to businesses of all sizes. In order to ensure that they are managing these factors effectively, organizations need to have a strong ESG committee or department in place.
There is no one-size-fits-all approach to structuring an ESG committee or department. However, there are some general principles that can be followed.
First - have a clear mandate for the committee or department. This mandate should define the scope of the committee's or department's responsibilities, as well as its reporting lines.
Second - have cross-functional membership. This means that the committee or department should include representatives from all of the key departments within the organization, such as finance, HR, legal, and operations.
The specific structure of the committee or department will depend on the size and complexity of the organization. However, a common approach is to have a three-part structure, one focused on environmental (E) issues, one focused on social (S) issues, and one focused on governance (G) issues.
The E part of the committee benefits from being led by the finance or accounting department. These departments are typically responsible for managing the organization's environmental risks and opportunities.
The S part of the committee or department benefits from being led by the HR or People team. These departments are typically responsible for managing the organization's social risks and opportunities, such as employee relations, diversity and inclusion, and workplace safety.
The G part of the committee or department could be led by the legal department. This is because these departments are typically responsible for managing the organization's governance risks and opportunities, such as compliance with laws and regulations, and corporate ethics.
In addition to the three-part structure, there are a number of other factors that organizations should consider when structuring their ESG committee or department. These factors include the following:
- The size and complexity of the organization
- The industry in which the organization operates
- The organization's risk appetite
- The organization's strategic priorities
By following these principles, organizations can create an ESG committee or department that is well-positioned to help them manage ESG risks and opportunities effectively.
Here are some additional tips for structuring an ESG committee or department:
- Make sure that the committee or department has the necessary resources, such as budget, staff, and access to data.
- Establish clear communication channels between the committee or department and other parts of the organization.
- Develop a regular reporting schedule so that the committee or department can track progress and identify areas for improvement.
- Ensure that the committee or department is aligned with the organization's overall strategic goals.
By following these tips, organizations can create an ESG committee or department that is a valuable asset to the organization.
