ESG and an organisation's governance

How do you start the ESG conversation in your organisation? What is the board's role? How do you go about developing and embedding ESG thinking in your activities, plans and strategy?

Category
Environmental, Social and Governance

In addition to the moral and business arguments (i.e. how it will positively impact participation rates, attendance, funding and investment opportunities, etc.) for placing ESG at the heart of your activities, governance codes and frameworks are increasingly putting a responsibility on organisations and their boards to factor a wider range of considerations and stakeholders into their decision making and long-term strategy-setting.

For our sector, this reflects an acknowledgement that sport and its organisations do not exist in a vacuum, but rather occupy a central role in a network of connected parties. These range from participants, volunteers and employees to customers, fans, suppliers, partners, funders and government. With many stakeholders in between.

Sport of course also has a very direct relationship with local communities and with society at large. It also has a huge platform, with the potential to effect real change in people’s lives and also to play a leadership role through its largely unmatched influence. How can it use that voice to shift the conversation, not just at the highest level, but also at a local, smaller scale?

This places responsibilities on our organisations and the people who lead them.

The Sports Councils are taking these responsibilities seriously:

Sport England

Its ten-year Uniting the Movement strategy recognises the transformational impact that sport and activity can have on the nation’s health and wellbeing. It sets out five big issues to tackle:
- connecting communities
- recovering from the Covid pandemic and reinventing as a sustainable network of organisations providing sport and physical activity opportunities for all
- focusing on positive experiences for children and young people
- connecting with health and wellbeing
- creating and protecting the places and spaces that make it easier for people to be active
Every Move sustainability strategy and action plan focused on Sport England leading, inspiring and supporting the sector to become environmentally sustainable, enabling greater opportunity for all people to participate in sport and physical activity, now and in the future.
Member of the Sport and Environment Climate Coalition (SECC) and signatory to the UN Sports for Climate Action Framework

UK Sport

Its ten-year strategic plan - Powering Success, Inspiring Impact – includes a core ambition to Inspire positive change:

“We will contribute to a happier, prouder and more connected society, using the power and platform of sport to inspire positive change.” It aims to “harness the power and platform of sport to drive positive change across wellbeing, diversity, inclusion and sustainability; walking the walk and using our voice to inspire others to act.”

Its environmental sustainability strategy includes a goal for high-performance sport to have a net positive impact on the environment by 2040 and for UK Sport itself to achieve net zero in its activities and operations by 2030.
Member of the Sport and Environment Climate Coalition (SECC) and signatory to the UN Sports for Climate Action Framework
Its Organisational Health tool includes Environmental and Social Impact as one of the 12 components that underpins well-run, effective, and sustainable sports organisations, within a thriving sporting system.

Sport Wales

Its Environmental Sustainability Plan – developed in partnership with the Carbon Trust – is aimed at helping the sector to make improvements and to contribute to realising the Welsh Government’s ambition for a net zero Welsh public sector by 2030.
Member of the Sport and Environment Climate Coalition (SECC).

sportscotland

The sportscotland Climate Action Framework combines the five UN Sport for Climate Action (UNS4CA) framework action points and the BASIS 12 Principles to guide management actions and policy making around climate change and sustainability.
Includes a self-assessment tool.
Member of the Sport and Environment Climate Coalition (SECC)

What should the board be doing about ESG?

More and more boards are having conversations about ESG. This will only increase with the emphasis which funders are placing on action being taken. Including ESG on board agendas can help an organisation not only to better manage ESG issues, but also to ensure the organisation is meeting its stakeholders’ expectations, from both a regulatory and a reputational perspective.

Different organisations are at vastly different stages of their ESG journey, the scale and impact of their activities and the resources available to them. It’s up to the board to set the scale and ambition of the organisation’s ESG activity accordingly.

Boards may want to begin by considering what ESG issues are most relevant (or ‘material’) to their organisation. Where feasible, this can be facilitated externally , and can involve a significant amount of research and engagement with stakeholders, depending on the complexity of the organisation. However, it is also perfectly possible to undertake this exercise internally and it offers an excellent opportunity to think deeply about the organisation’s circumstances and what it can realistically (but also ambitiously) aim to achieve.

To avoid straying into operational business, it is sensible for a board to delegate this undertaking to its management or to a team within the organisation which can dive into the topic and explore key issues and areas of operation, identifying potential actions which can be taken. The board can then be apprised of the findings of the exercise or can provide any requested input.

Once the material issues have been identified, organisations can begin to pinpoint in more detail areas for action, with the board approving this and setting appropriate targets.

Having – or establishing – the right internal infrastructure can support ESG activity. Appointing an ESG lead at management level, and/or designating a particular board member to look at ESG in more depth, can help to raise the profile of ESG within an organisation, providing both momentum and accountability. This person – or team – can help to achieve buy-in for ESG activity and initiatives and also highlight the risks of inaction. Some organisations may choose to establish working groups or committees, to look at ESG in general, or to look at one particular area of high importance.

The inclusion of ESG issues in strategic discussions and future developments is likely to make organisations better places to deal with future challenges and business-disruptors. Boards that act now to frame their ESG ambitions will be ahead of the curve in terms of effective delivery in both established and new formats. They will also likely be better positioned to attract and retain key stakeholder groups and staff/volunteers whose interests align and who are enthused by the organisation’s vision and commitment.

From a management perspective, ESG can profoundly impact the way an organisation operates, opening new challenges and new opportunities. Securing the commitment and engagement of management (and the workforce at all levels) will drastically enhance the success of embedding an ESG strategy throughout the organisation and its activities.

It will also help to streamline reporting requirements – those who deliver and report on activity and progress will be in alignment with the board which maintains the oversight function. Speaking the same language and pulling in the same direction will maximise the rate at which the strategy can be implemented.

There can be several barriers to making ESG action happen – not least funding and resource constraints. There will always be competing priorities, and it can feel difficult to know where to get started with ESG.

Organisations can start small and focus on behaviour change – this might look like something as simple as making sure that employees, fans and participants are encouraged to recycle. There are other ways of making progress without needing to source the funding or staff required for a large project or strategy kick off. One is to update existing policies for suppliers and for transport, so that these include environmental and social criteria. There may be other cost-savings or even revenue generating opportunities, for example around electricity consumption. Ultimately, when ESG activity is shown to be relevant to an organisation’s key operations and overall strategy, it will be far more impactful.

Organisations may choose to develop a stand-alone ESG strategy. For others, this may not be an appropriate – or realistic – use of resource. Whether or not there is an ESG strategy, an organisation’s ESG activity should be integrated into its wider organisational strategy. This means that ESG does not sit in silo, but instead is treated strategically and across all the different functions of the organisation.

Examples of ESG/sustainability plans & strategies

Within sport, organisations can break down their relevant ESG issues across three levels which can help to serve as a starting point for what might go into a potential ESG strategy or at least stimulate thinking around feasible steps that can be taken.

The organisation’s own operations

This may include:

the energy consumption of its buildings
the organisation’s policies and activity on diversity, equity & inclusion across its workforce and participants
the prevalent culture within the organisation and how this is reflected in its relationships with stakeholders and its activities
engagement with stakeholders, how the organisation communicates and the levels of transparency, openness and accountability it demonstrates
net zero transition planning and the setting of achievable targets

The organisation as a contractor, procurer and event organiser

This may include:

whether environmental impacts and human rights are included in the organisation’s procurement policy for equipment and materials
how the organisation works to encourage or nudge its participants and fans to travel to events and fixtures in an environmentally friendly way
supply chain controls
partners with whom it delivers events and competitions

The organisation’s wider influence

This may include:

work that the organisation can get involved in through federations and associations, such as joint campaigns to raise environmental awareness amongst fans and participants
leveraging its reach, profile and stakeholder base to educate and promote action
how a central body, such as a NGB, supports and oversees the ESG progress of bodies within its structure
Examining the footprint of large events to leave a lasting legacy with left over equipment and/or waste

Why should boards engage with ESG?

Boards increasingly view ESG not simply as a nice-to-have, but rather as a central feature of their strategic planning.

ESG is seen as a business driver – helping to promote the success of organisations across all sectors. Plus, the increasing focus on ESG issues in the media, among governments, funders and partners, and in society more generally has raised its profile to a level that organisations cannot ignore.

Take environmental sustainability as an example. 82% of respondents in research for Sport England indicated that they want their organisation to be more ambitious in tackling this issue.

Research has shown that young people attach greater importance than older generations did to social issues. They increasingly expect the brands they engage with or the employers they work for to take a position on social and environmental issues, from mental health and EDI to modern slavery. More than 70% of younger people want to see meaningful action taken on environmental sustainability. These are the future of our sports. Organisations which don’t act will lose relevance, reputation and the engagement of future generations.

As a result, organisations need to take action. For some, this might include addressing new ways of reporting or sharing their progress, gathering and collating new metrics and factoring different considerations into their activities and decision making. Small wonder, then, that boards must rethink how they oversee all of this.

Consider the benefits to an organisation:

Alignment with a growing desire to see environmental sustainability and social good at the heart of business activities and service delivery
Demonstration of taking action to preserve or enhance the environment and communities upon which the sport depends
Attracting long-term partners, sponsors and funders who have made commitments regarding their own ESG responsibilities and strategic direction
Potential for new, diverse revenue streams and funding opportunities
Enhanced brand reputation – and recognition as a leader
Reputation for increased transparency and effective management
Improved risk management
Improved internal reporting, aligned to agreed and publicly stated commitments
Organisational growth
Improved legitimacy and ‘licence to operate’ in the eyes of key stakeholders
Deeper, more integrated stakeholder engagement, leading to improved relationships and a better understanding what key groups are seeking
Improved quality of staff/volunteer recruitment and higher rates of retention
Greater rates of participation
The benefits of acting before being ‘pushed’ – more time to get it right, do it properly and more likely that efforts are seen as genuine/authentic

From this list, it is clear not only that ESG should not be neglected, but that it needs to be a central pillar your strategic thinking.

Given the centrality to strategy and delivery, the board should lead on defining the organisation’s ESG values and objectives as part of its wider strategy-setting and oversight responsibilities.

Ultimately, ESG should be embedded and incorporated into other board reporting, strategic thinking and decision-making to ensure that tackling ESG challenges is not seen as a passing ‘fad’ but becomes an integral aspect of developing an organisation that is sustainable, ethical and efficient on several levels.

Five stages for delivering meaningful action on ESG

Getting ESG on the agenda:

What is the board’s current understanding of ESG?
Has the organisation identified key ESG-related risks?
- Are these present on the risk register? Is the risk register reviewed, updated and consulted regularly?
- Are these general risks or specific to the sport or organisation?
- What are the risks of inaction?
What is the board’s view on significant ESG-related risks facing the organisation and the work it does to deliver to the community it serves? How are those views informed?
Are ESG issues explicitly included in board strategy days? Perhaps a section of the strategy day could be devoted to ESG.
Has the board discussed the incentives for the organisation to act and report against ESG:
Could the organisation’s purpose be better served by embedding ESG thinking and initiatives within its activities, such as through:
- improved efficiency and resource use
- energy savings
- attracting talent and engagement
- enhanced reputation
- opening up new business opportunities and income streams
- reinforcing or re-committing to the organisation's mission, values, culture and behaviour?
What are other sports or organisations in the sector doing? What lessons can be learned, or are there opportunities for collaboration?
In what ways would ESG reporting improve board decision making?
Would a publicly stated ESG commitment improve stakeholder trust and confidence in the organisation?
Can the benefits of improved stakeholder trust and confidence be measured?

Suggestions for getting ESG on the board agenda:

Identify which ESG factors directly impact on the organisation’s activities, partnerships or opportunities.
Understand the perspectives of all key stakeholders with regard to ESG. This may involve taking into account multi-generational, multi-community perspectives.
Systematically incorporate these factors into board papers and discussions – link updates, proposals and actions required of the board to the organisation’s agreed ESG
Review risk management approaches from an ESG angle
Undertake ESG awareness training, including how to identify ESG’s ability to impact the activities, success and sustainability of the organisation.
Use scenario planning to develop thinking on how ESG matters could impact on the organisation and its activities – for example:
- Extreme/adverse weather events in terms of events, participation or other key areas of delivery
- Potential media scrutiny of the organisation, one of its partners or a part of its supply chain
- Stakeholder campaigning on conditions for participants/athletes, spectators, etc.
- Use existing stakeholder engagement plans to assess the level of interest in ESG matters.
- Assess the base level impact of ESG factors on the organisation’s ability to deliver its strategic aims.

It can be useful to establish a committee or working group to discuss the benefits of ESG for the organisation, its athletes, participants, staff and volunteers, key stakeholders and the general public. This will enable a deeper dive into the specific contexts of the sector, sport and the organisation with regard to ESG. The board will need to delegate authority to the committee and provide appropriate terms of reference and should receive its recommendations, ensuring that it devotes sufficient time to consider these closely.

To achieve maximum impact and buy-in:

Link ESG – including specific ESG activities – to the achievement of the strategic plan
Identify the opportunities and challenges for adopting an ESG framework
Articulate the risks associated with not adopting ESG targets

An ESG change programme will be tailored to each organisation, taking into account where it currently is, its ambitions and the level of resource it can commit. It will need to consider a range of issues in the short-, medium-, and long-term, analysing the benefits and potential risks (of both engaging and not engaging with the ESG agenda), take into account the desires and concerns of a range of stakeholders, each with their own perspectives, and establish how it can support future strategic, financial and operating plans.

Establish the vision the organisation seeks to achieve by incorporating ESG into its activities.
Discuss and agree on the metrics required to assess performance.
Publicly disclose the metrics and timeframes chosen.
Assess and evaluate the data already collected (if any) as to its suitability to support the organisation’s ESG ambitions.
Establish internal messaging and appropriate channels of communication (these may vary according to the group targeted) to support the programme and highlight individual actions that can contribute to it.

A fully integrated ESG programme requires buy-in from all parts of an organisation, from the board, senior leaders, staff and volunteers. It also needs to be incorporated into the organisation’s existing governance, risk, strategic and reporting activities.

Make ESG a key aspect of the new/revised strategic plan (and supporting documents and activities, such as risk management, budgeting and operational actions).
Incorporate ESG aims into board reports. For each board paper, include a short summary of how the contents of the paper contribute to the overall strategy.
Align policies and procedures with ESG targets.
Include ESG targets in departmental and individual goals and performance reviews.
Provide training and development opportunities for staff and volunteers.
Work with third parties/suppliers/contractors to embed delivery targets in their activities for the organisation.
Ensure internal and external communications reinforce ESG goals and the agreed vision.
Review the metrics and analyse what the data tells you about the organisation’s performance.
Identify trends and anticipate future opportunities and challenges.
Review and revise investment and purchasing criteria.

Audit the organisation’s activities against the stated aims of ESG. Report candidly on success and failure.
Assess whether the data collected is sufficiently robust. Seek independent external validation or support.
Benchmark performance against other organisations both in the sport and other sectors, and publicly disclose.
Amend the targets to reflect the changes in the organisation, the sports sector and wider society.
Collaborate with others to deliver a bigger ESG impact, such as local authorities on travel, suppliers on the provision of goods or services, or organisations in your sport or from across the sector on campaigns or initiatives.

Would a dedicated ESG or sustainability committee help?

Organisations have different needs and circumstances. Governance structures need to be able to respond to your needs, the complexity of your business and activities, and where you are on your ESG journey.

There is no one-size-fits-all and your governance approach to ESG may be unique to your organisation.

The most common option still remains for ESG and sustainability to remain the responsibility of the whole board. For some organisations, however, it may be appropriate to establish a board-level committee or include it among the responsibilities already delegated to an existing committee, such as an audit or risk committee.

Some may choose to establish a committee at executive or management level, allowing staff to carry out deep dives and report to the board on a regular or semi-regular basis.

A board-level committee can help organisations to meet any reporting obligations they might have and bring a level of attention to sustainability which can stimulate activity internally and send a signal to external stakeholders that the issue is being taken seriously. They can help boards in their strategic thinking or help to coordinate sustainability factors across multiple strategies and departments.

In deciding whether it is appropriate to establish an ESG or sustainability committee, an organisation might wish to consider the pros and cons.

Pros

Cons

Ensure that ESG gets the attention it deserves

A dedicated committee can drill down in greater detail and give due consideration to the issue. This can help the board to appreciate the big picture and put the theory into action

Create a silo

While an ESG committee can help to integrate the issue into different areas, it can also risk considerations being isolated from wider discussions.

Provide a single point of accountability

This can help to increase the quality of reporting and provide assurance that systems and policies are in place.

Require additional board time and resources

Another committee at board level means more time spent by board members who sit on the committee and the governance lead who supports it.

Protect the board’s time

Delegating some of the oversight can help to ensure that the board can use its time effectively, while enabling the committee to devote the requisite amount of time to the issue.

Missing the right committee members

ESG skills and experience can be specialised and may not be held by board members. If the composition of an ESG committee is not correct, its oversight, expertise and therefore impact will be reduced.

Integrate ESG into the wider organisational strategy

ESG touches on many areas of a business. A dedicated committee can facilitate deeper collaboration and integration across departments, initiatives and activities.

Duplicate work of other committees

As ESG can impact multiple areas of the organisation’s business, there is potential for a degree of overlap with other committees’ briefs. This risk increases when the terms of reference are not tightly drawn. Duplication risks wasting time and resources as well as reducing accountability.

Develop leadership and expertise

Strategic attention at board level can improve levels of leadership, expertise and use of resources.

Develop an over-reliance on the committee

The rest of the board may feel that ESG is solely the responsibility of the dedicated committee, leading to a lack of understanding and engagement from non-committee members. This can risk diluting the responsibility of the full board.

Bolster your organisation’s reputation

In raising the visibility of an organisation’s ESG commitment, an ESG committee can enhance a reputation among stakeholders. It can also boost internal buy-in by demonstrating how ESG positively affects the business case.

Function at an operational level

ESG committees can slip into a management-style approach, rather than offering strategic oversight, especially in the early period of their establishment. This is exacerbated in organisations where the overall approach to ESG is less mature.

Top tips for an ESG committee

If you do decide that establishing a dedicated committee for ESG is the right move for your organisation, follow these tips:

Understand the motivations for establishing or refreshing an ESG committee at board level.

What questions does it need to answer? To what internal or external expectations does it need to respond? What does the board want it to achieve?

Choose carefully when naming the committee.

What it is called will have an impact on its remit. Some organisations choose to include three or four different areas in the committee’s name. Others rename their committee as its role evolves over time.

Take existing governance, oversight and ESG structures into consideration.

Existing sustainability or ESG teams, at an operational, management or executive level, should be consulted. This is a good opportunity to examine any gaps or opportunities for further integration within existing structures. Consider how the committee will impact on these teams and their decision-making processes.

Pay attention to ESG not just within the forum of the committee, but also within the full board.

An over-reliance on a handful of ‘experts’ is risky. The board needs to be able to evaluate and oversee matters for itself.

Know that the committee is unlikely to be a final piece.

Governance structures for ESG will mature as the organisation’s overall strategy and approach matures. A willingness to be agile and to revisit the committee’s remit and role is important.

General tips for the success of any committee are also relevant:

The committee’s terms of reference need to be tightly drawn – and then reviewed on a regular basis.

This helps the committee to be clear about its remit and aims, as well as to respond flexibly to external changes in the sustainability landscape. These model terms of reference can help with this.

Terms of reference for the sustainability or ESG committee

The committee members are absolutely central to its success.

They should be carefully chosen to ensure that the right mix of skills is represented. The skillset can be developed, or sourced through external appointments.

Identify – or create – clear lines of accountability for ESG and the areas which fall underneath it.

Establishing who owns which topic – at management and at board level – will help to streamline both internal communications and external reporting. The committee chair needs to be clear about their responsibilities and accountability.

Clarify the committee’s authority, including its power to make decisions and to control budgets (where applicable).

Whether it sits in an advisory role to the board, or with its own capacity to act, makes a difference. Draw clear distinctions between the work of the committee, and the work of other board committees. Areas of overlap can often emerge, which lead to a duplication of work if not carefully communicated and monitored.

Ensure that the committee is adequately resourced.

Any committee requires additional time and effort from its members. It also needs to be supported by a secretariat function and may also on occasion require advice from legal or other professional services.