Amid global environmental, social and governance (ESG) concerns, board directors are coming under increasing pressure to rethink their governance and decision-making strategies, a section of the findings from PwC’s 2022 Caribbean’s Corporate Governance Pulse Survey has said.

The recently published report titled
Picking up the Pace, which gauged the views of 193 directors across private and public sector organisations in the Caribbean, called on these corporate leaders to keep apace emerging trends as they build out new business strategies, inclusive of properly developed ESG models, amid a changing world and environment.

It is said that while small island developing states (SIDS) of the Caribbean are not large contributors to global greenhouse gas emissions, they are also disproportionately affected by its impact and as such should be a part of the solution. Aside from citizens and government action, the input of businesses operating in the environment is also called into focus, with a renewed thrust for them to see beyond the bottom line as they begin to embrace and prioritise ESG as a sustainable practice and a commercial imperative.

“Far from being just altruism, ESG impinges on the most pressing issues of the boardroom agenda, from talent gaps to winning back customers. Stakeholders, such as consumers and employees, are also now gravitating towards green and socially-conscious organisations,” the report highlighted

“A standout record on ESG could also help your organisation to become a magnet for talent. This includes attracting the socially and environmentally conscious generations coming out of education and into the workforce, who want to work for organisations they see as being forces for good within society,” it continued, noting also a shift in the focus of investors who have now closely began to look at ESG performance as closely as financial returns when judging where to commit their funds.

The study noted that while more than 60 per cent of the directors said that ESG was in some way linked to their company’s strategy and acknowledged its financial impact, it is, however, troubling that less than a third have reported the issue as being a regular part of their board’s agenda. Less than 20 per cent also indicated that their board had a well-defined process to give proper oversight.

In light of these findings, it has been said that while some of the directors recognise the medium-to-long-term threats posed by unhealthy societies and a climate-ravaged planet, they often don’t believe it’s their most pressing priority when their firms grapple with more pressing business issues and difficult economic conditions.

“With stakeholder focus on ESG increasing and the associated risks becoming ever more evident, there is now a compelling case for it to move higher up the agenda. Gone are the days of a purely financially focused approach to strategy that fails to take the needs of stakeholders, not just shareholders, into account, since business as usual will not mitigate the climate crisis or bridge the socio-economic divide. As laid bare in our 25th Annual Global CEO Survey, now is the time for bold leadership to build and deliver sustained outcomes,” PwC said in its assessment of the findings.

In underscoring governance as key to the process, the multinational accounting firm called on directors to ensure that there is strategic oversight, accountability and transparency among the key aspects of the corporate governance framework as their organisations move to deliver on the promises of ESG.

Boards in leading the change, it further urged, to also prioritise the diversity of its memberships as well as the time they devote to emerging global risks and the performance objectives and incentives that will help to drive results.

“To achieve effectiveness, directors must be proactive with both strategy and governance instead of relying on regulations to set the agenda. Organisations that grasp both the threats and opportunities are establishing explicit and transparent commitments to sustainability and society across their entire value chain. Additionally, they are constructing governance frameworks to assess, improve, and enforce their objectives,” Ronaele Dathorne-Bayrd, ESG leader for PwC East Caribbean, said.

“There are Caribbean organisations out in front which clearly appreciate this and have already taken decisive and meaningful steps, reorienting their businesses toward a value creation ecosystem that adds environmental sustainability, employee engagement, external partnerships, and broader societal impact to financial imperatives as measures of success, leading the way in this area. They don’t just talk about change but also deliver. However, many others need to act now or risk being sidelined,” the report further outlined.

“The new and emerging risks facing boards should encourage the recruitment of more directors with specialist knowledge in areas such as ESG, digital transformation and cyber risk,” it added.