ESG has become common word for many and has gained vast interests over the past years due to efforts by various agencies to drive sustainable growth in economic, social, and environmental aspects.   From the IOD’s experiences in conducting trainings, seminars, assessment of listed companies, and relevant research reports, we found that many companies have leaping evolution in this front.  This is a result of cooperation and direct oversight by the Board and corporate leader, which emphasized the significance of ESG and its long-term benefits to the company and stakeholders.

Our experiences over the years gave us insight about some interesting ESG points being implemented by certain companies but have yet to turn into widespread practices.  In this article, we would like to share three ESG practices that may be applicable with your organizations.

i)                 ESG Advisory Committee: Alternative to gaining ESG expertise

Among early steps toward ESG development taken by most companies is the recruitment of director with ESG experiences to offer guidance or useful comments for the management.  The move also reflects the company’s commitment toward ESG, which could build confidence and positive image in the eyes of stakeholders.  However, it is not an easy task and not all companies can afford to get director with such qualification on board, especially for companies in specialized industries that require personnel with specific technical knowledge.  In addition, some companies also have extensive exposures to ESG issues beyond just one or a few directors to understand them all.   Companies of this characteristics sometimes employ other methods to cope with the matter such as nomination of Advisory Committee, comprising a group of experts in various fields to provide opinions and advise the Board about ESG practices in comprehensive perspective without being too specific in any particular aspect.  The Advisory Committee is rather common in other countries, particularly in companies with several ESG issues, as it will help the Board screen ESG issues and strategies.  The Advisory Committee usually comprises of sustainability experts and representatives from relevant stakeholders etc.

ii)              Stakeholders as reviewers, not input providers

From the IOD’s experiences in interviewing various listed companies about determination of key ESG and sustainability issues, crucial source of information used in the consideration is the views of management, indication of key ESG issues in international standards, and views of stakeholders gathered via various channels.   However, some companies chose to set priorities on ESG or sustainability issues from the management perspectives as they believe that operators know best about the company’s sustainability issues.  After identifying issues from the management,  they will be categorized, assessed impact on the company and stakeholders and then prioritized.   The assessment outcome and prioritized issues will then be cross examined with stakeholders.  Such process and method will save time and allow stakeholders to fully express opinions and further extend idea.  Openly ask stakeholders about ESG issues right from the start could result in diverse answers and suggestions that are irrelevant to the business.

iii)             From Sustainable Production to Sustainable consumption

Studying ESG management or sustainability strategies of companies through publicly disclosed reports, most focused on adjusting strategy or operating direction to promote production process that emphasizes sustainable growth such as making production process more cost efficient, less emission, use alternative energy for energy saving purpose, and seek raw materials from sustainable sources.  These are considered sustainability from the supply side.  However, some companies were able to adjust strategy or operating process to promote consumers to recognize the significance of sustainability and take it into account. These are considered sustainability from the demand side.  For instances, companies may encourage consumers to recycle old products and create new goods or products.  Another example is liquor producer that launched products to promote responsible drinking such as alcohol-free beer etc.

Therefore, it would be nice if companies can develop sustainability strategy or management direction of sustainability issues in both supply and demand sides altogether and start to shift perspective from Sustainable Production to Sustainable Consumption.

For certain companies, the three aforementioned practices may seem common as they have already been implemented.  However, companies that may not familiar with such practices could consider putting them into implementation.  Even though these practices may not fit with some companies but it could still be a fine beginning for the company to start discussing or taking more diverse views toward sustainability. 

In 2023, the IOD plans to continue driving ESG and sustainability issues through director training and seminar via Community of Practices, particularly on sustainability front, and more ESG coverage of corporate governance assessment.  We would like all directors to follow this trend and take parts in driving Thai companies toward sustainable growth.