GOVERNANCE AND ETHICAL LEADERSHIP IN THE AGE OF ESG
R&C: What role do governance and ethical leadership play in the context of environmental, social and governance (ESG) compliance?
Wandall: Environmental, social and governance (ESG) regulatory obligations, whether under ESG-specific laws such as the European Union’s (EU’s) Corporate Sustainability Reporting Directive (CSRD) or more pillar-specific responsibilities, such as those set forth in UK Modern Slavery Act, provide a complementary framework to the established elements of an effective compliance and ethics (C&E) programme, which in many organisations spans the full range of regulatory obligations, including ESG. As a result, ESG obligations support the C&E programme, and the C&E programme, in turn, supports the ESG programme. In practice, for both the ESG and C&E programmes to yield measurable and meaningful outcomes, they must be supported by both effective corporate governance and ethical leadership. Firstly, governance provides direction, prioritisation and oversight. In the absence of these core elements, ESG and C&E programmes can produce metrics, but they are likely to result in inconsistent reporting. Secondly, ethical leadership focuses on making the right decisions for long-term growth, which is key to sustainability.
Kenny: Governance and ethical leadership are crucial for ensuring effective ESG compliance. They set the foundation for responsible decision making and risk management by creating a framework that drives strong governance structures, policy development, enforcement, transparency and accountability. Proper governance frameworks support disclosure of ESG practices, limiting greenwashing and misconduct. Effective governance also identifies and mitigates ESG-related risks, such as regulatory violations or reputational damage.
Apr-Jun 2025 Issue
Dun & Bradstreet
Ernst & Young LLP
GSK
Novartis