It’s undeniable that governance takes a back seat to environmental and social in the ESG equation, but if real change is to take place then it may be the most important letter in the abbreviation.

A strong ESG proposition offers a range of benefits that are crucial to a company’s success. These include winning more business, reducing costs, greater strategic freedom, enhanced investment returns and improved employee productivity.

With global ESG investment now exceeding $30trn (£24.5trn) , it’s clear that opportunities to improve ESG execution are not to be missed. Despite environmental and social aspects garnering more attention, strong and transparent governance underpins the planning, execution and reporting of any ESG strategy.

With companies like Balfour Beatty, Landsec and KPMG promising lofty sustainability targets and social programmes, it’s really the governance that’s key to unlocking a stronger ESG strategy and the rewards that come with it. Without clear and comprehensive governance, it’s unlikely that companies will fulfil their individual pledges or achieve real estate’s target of net zero carbon emissions by 2050.

Implementing effective governance is a complex task that can be guided by several key factors:

  1. Data is essential for good governance. Sometimes the data is collected just for the sake of collecting it. An efficient governance strategy creates transparency and gives the right people access to the right data. This is essential to actioning data insights and auditing performance.
  2. Participation of all stakeholders will deliver the best results. Sending the environmental performance to a facilities manager in a basement will not reduce its carbon footprint. Engaging all parties in the creation of carbon and educating them on how to reduce it will.
  3. For ESG initiatives to be adopted widely and successfully, the governance framework for both financial performance and ES outcomes needs to be aligned. Robust financial governance to ensure that the targets are in fact deliverable should not be forgotten.
  4. Lofty goals (like a timed net zero target) need to have a plan of action and incremental KPIs for all stakeholders.
  5. Good governance should enable benchmarking against peers and competitors. Knowing how you measure up to your competition adds value by identifying strengths and opportunities for improvement and growth.

At the end of the day, any ambition is only as good as your ability to plan and measure it, so why is the ‘G’ in ESG seemingly forgotten?

Marcus Moufarrige is chief executive of ility

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