Introduction
Globally, new requirements for environmental, social and
governance disclosures are being introduced. Voluntary reporting frameworks are
rapidly transitioning into mandatory reporting in many parts of the world.
According to KPMG International’s Survey of Sustainability Reporting 2020,
80% of the world’s 250 largest companies now report on sustainability, while
sustainability reporting in the Asia Pacific has grown by 6 percentage points
since 2017 to 84%. Amidst such a rapidly evolving landscape in the environmental,
social, and governance disclosure, the Company Secretary has a role to play.
Positioned with a bird’s eye view of all organisational and board practices,
the Company Secretary can support internal efforts to drive the ESG changes and
collaborate with the Board and relevant departments including the Chief
Sustainability Officer (CSO) or the ESG function.
ESG is an increasing strategic and regulatory concern for
private companies. A successful ESG strategy can help maximize value and
strengthen relationships with a company’s stakeholders including consumers,
employees, existing shareholders and potential investors. While “ESG” covers
environmental, social and governance considerations, good governance provides
the foundation. Integral to good governance is having internal controls that
promote transparency, accountability, and the monitoring of risks to avoid
mismanagement and regulatory sanctions. This article explores how company
secretaries can effectively support a company’s ESG strategy.
The roles of company secretaries in ESG
Although the Companies Act has exempted certain companies
from having a company secretary, some have chosen to do so. It is often the
case that the role of company secretary is combined with the role of general
counsel or across an in-house legal team, and both roles fulfil an important
function in advising and supporting the Board. Typical responsibilities
include:
- Guiding the board
on their responsibilities.
- Sharing
information within the board and between senior management and
non-executive directors and shareholders’ views.
- Developing and
overseeing internal systems to ensure compliance with a company’s legal
requirements.
- Monitoring
changes in legislation and relevant regulations.
- Overseeing
the day-to-day administration of the company to allow directors to focus
on overseeing business strategy and operations.
In view of the above responsibilities bestowed on a
company secretary, he/she can support the ESG agenda in the following ways;
Ø
Awareness of trends and best
practices
As the custodians of corporate governance within a
company, company secretaries must educate the board on governance developments
and advise on their impact on a company’s business strategy, such as the risks
arising from climate change, energy sustainability and wider stakeholder
management with customers and suppliers. While private companies are not
currently subject to the mandatory ESG reporting requirements, companies should
start to focus on building the good governance foundations to be prepared for
future regulation. A company secretary should therefore look to build their
knowledge of ESG, regularly monitor regulatory and legal changes and research
how other (and particularly similar) organizations are approaching the subject.
Given the many different parts of a business company secretaries regularly
interact with, they can enable an internal joined-up approach to ESG.
Ø
Relationship with the board
A company secretary should ensure that ESG is a standing
item on board agendas and that ESG-related responsibilities are integrated into
a board’s decision making. This could include the introduction of director
development programmes such as sustainability-related training and keeping the
board informed on shareholders’ and other stakeholders’ views on ESG. The
company secretary should also play a lead role in the implementation of ESG
governance, an example of this being the establishment of a dedicated committee
of the board to manage a company’s ESG objectives, and we can help on setting
the terms of reference for the ESG committee.
Ø
Disclosure and reporting
requirements
Company secretaries will assist with preparing a company’s
annual report, including the director’s report. As internal and external
stakeholders such as investors and consumers are increasingly looking towards
annual reports to gain an understanding of a company’s ESG strategy, small and
medium-sized businesses are focusing on sustainability and energy consumption
reporting, alongside how they engage with their employees, business partners
and suppliers as part of the directors’ report. Those supporting the board can
play an important role in monitoring business performance and key events over
the course of a financial year to ensure the directors’ report reflects the
steps the company has taken to engage with its stakeholders.
Ø
The corporate strategy
Company secretaries should consider how ESG is
incorporated into their company’s long-term strategy. This could include
creating an ESG roadmap to set out planned ESG initiatives to be employed by
the company. This roadmap would include the governance structures, policies,
and procedures to monitor and respond to the ESG related risks and opportunities.
Conclusion
While not all company secretaries will currently regard
their role as being strategic within their company, the traditional image of
company secretaries as the “Guardians of Governance” or the general counsel as
the “Conscience of the Business”, has never been more important. Such
individuals are perfectly placed to support and encourage good governance
practices, through which a company’s ESG objectives can ultimately be promoted.
In summary, the role of the company secretary in ESG is critical
for ensuring that the company operates in a responsible and sustainable manner.
By prioritizing ESG considerations and integrating them into decision-making
processes, companies can not only meet regulatory requirements but also build
trust with stakeholders, improve their reputation, and contribute to a better
world.