ESG is a crucial part of today’s world of work. It’s a key framework to assess and implement responsibility and sustainability in your organisation. While environmental and social practices are often the focus, the ‘G’ in ESG is often more of a mystery. However, this shouldn’t be the case, as good governance can be the key to achieving and maintaining success and resilience in the long term.
Governance focuses on how an organisation is managed and controlled to ensure that it is responsible. While it only takes up one letter, the G could better be defined as governance, risk and compliance – three aspects which can build an effective approach between them. Through using these effectively, you can create a culture of accountability, transparency and sustainable decision-making in your organisation.
What is governance?
Governance refers the way that an organisation is managed to ensure that it is effective and reliable. Governance includes a range of frameworks, processes and policies that work together for the goal of good governance. It involves quality board management, effective decision-making and accountability throughout the organisation.
Quality board management
A strong governance structure starts at the top. An informed and organised board can make the right decisions and ensure that the organisation can run responsibly and reliably. It’s also important that the board are able to meet regularly and make the most of their meetings, which requires strong and comprehensive board management.
Informed decision-making
Effective governance relies on informed, data-driven decision making. By working with comprehensive datasets and strong analysis, the right choices can be made throughout the organisation. This involves implementing systems that provide real-time insights and effective data visualisation to ensure that decisions are made swiftly and accurately.
What is risk management?
Risk management is a process of identifying, assessing, prioritising and appropriately planning for potential risks to the organisation. It’s a proactive approach to safeguarding the success of your organisation and the people who rely on it.
Identifying risks
The first step to achieving quality risk management is to properly identify threats. Ensuring accuracy is key to getting this part of the process right, and this can be achieved by having clear visibility of information. By having a clear view over your whole organisation, you can make a clear and accurate assessment.
Assessing risk levels
Once identified, each risk or threat should be assessed to understand its potential impact, and how likely it is to occur. This can be mapped onto scoring system to accurately record and prioritise risks within a risk management system. You can also use this part of the process to assess the kind of response that is likely to be required.
Implementing controls
Effective risk management relies on implementing proportional and appropriate controls to provide the necessary response. Each control should be created and recorded alongside risks, ensuring that they are correct for the level and type of risk to be faced. This kind of recording can allow you to put those controls in place and continuously monitor their implementation.
What is compliance?
Compliance refers to adhering to laws, regulations and agreements that govern business operations. It's about ensuring that every aspect of the organisation meets legal and ethical standards. It goes without saying that your organisation cannot succeed if it is faced by serious legal challenges.
Legal obligations
The bare minimum your organisation has to do is comply with the law. This can come in many forms – tax law, employment law, data protection, or industry-specific standards. It’s vital to stay updated on changes to legislation that can affect your organisation, to ensure that you are prepared for the challenges of maintaining compliance.
Best practice
Beyond legal obligations, organisations should strive to implement best practices in compliance. This involves continuous training, clear communication of policies, and regular compliance audits to ensure that the organisation remains within legal and ethical boundaries.
The missing ‘G’
Governance is more often overlooked than other aspects of ESG. This may be because it is often harder to directly measure the impact of good governance. In many ways, however, it can be the most important, as good governance can help you to maintain strong strategies for environmental and social best practices.
Governance may not always be the central focus of ESG strategies, but it is vitally important to achieve success in your organisation. A good governance strategy can help you to work more reliably and responsibly to achieve sustainable successes. By using robust strategies, you can build a strong framework to support long-term resilience and success.
You can learn more about governance and its importance for success in the world of work in our recent blog. You can also learn more about how we can support you to achieve quality governance and risk management with our solutions.