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July 15, 2022

ESG: Incorporating corporate governance standards into your business operations

Corporate governance is a critical element of ESG.

Measuring non-financial factors, such as environmental, social, and governance (ESG), is essential to investors when considering a company’s sustainability. Although environmental and social initiatives often take center stage in the ESG conversation, corporate governance is also a core element of any ESG strategy.

In the context of ESG, corporate governance consists of a company’s leadership, pay, audits, internal processes, and shareholder rights.

What does corporate governance look like for middle-market businesses? 

There is no one-size-fits-all approach to ESG. Governance strategies can be unique from company to company. What's relevant to one business may not be to another down the street. Small to midsize operations can start with consistent, formal audits of their finances and other regulated areas. They can take steps to be fully compliant with any local, state, and federal laws.

As a company grows, its governance standards should grow with it. Businesses experiencing growth should consider executive oversight, such as a board of directors comprised of diverse, qualified leaders.

The value of good corporate governance 

While governance execution may differ from business to business, the benefits of good governance pertain to all. Sound corporate governance gives stakeholders confidence in a company’s operations. Good governance is transparent about a company’s initiatives and encourages accuracy. It shows stakeholders that the company is accountable and makes decisions with integrity.

These values are increasingly appealing to investors, insurers, and consumers—and policy makers are taking action. Earlier this year, the SEC proposed greater disclosure regulations for investment funds’ incorporation of ESG standards. As more regulations are imposed, businesses will need to find ways to standardize and disclose their governance practices.

How do you measure corporate governance? 

Implementing a good governance strategy is healthy, but how do you know where you measure up to global standards? A great place to start is by taking the Marsh ESG Risk Rating assessment. This tool can help you know where your potential ESG-related risks are.

While knowledge can be excellent, action is even better. Reach out to us today to learn how we can help you reach your corporate governance goals.