Page 565 - COSO Guidance

1. Governance and culture for ESG-related risks

Table 1.2: Approaches for enhancing ESG-related risk awareness on the board

Approaches Description Example
Include In some cases, a formal mandate is used to describe Stora Ensohas a subcommittee on sustainability and

references to the board's (or committee's) responsibilities for ethics which includes the following duties in its charter:
ESG-related overseeing ESG-related risks. Specific reference to
risks or issues ESG issues in the charter or terms of reference pro- • Review of matters, including those of a legislative and
in the board vides clear direction for ESG integration at the board regulatory nature, which may have a significant impact
on Stora Enso’s activities and reputation with respect
charter level.
to sustainability and ethics
• Review of social, political, economic and environmental
trends that may have a significant impact on Stora
Enso’s business activities and performance 27
Establish a A separate committee with an ESG focus may be Mondi plc, an international paper and packaging
board established with a clear mandate to oversee company, divides responsibility for overseeing risks
committee ESG-related risks. The remit of this committee may between a sustainable development subcommittee and
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that focuses on include a selection of ESG-related risks, such as the audit committee. The sustainable development
ESG-related environmental and social risks, with governance risks committee manages health, safety and environment
risks and issues managed by the risk or audit committee. risks, and the audit committee manages the rest of the
Other board committees, such as the audit company’s risks.
committee, may focus on specific aspects of
ESG-related risk, such as the reporting and disclosure
of greenhouse gas emissions or human rights.
Appoint Boards should understand the company’s most In 2017, ExxonMobil added an atmospheric scientist
directors with important ESG issues and have access to expert points and former president and director of the Woods Hole
f
ESG-related of view to inform the board or relevant committee Oceanographic Institution to its 13-member board of
knowledge or (e.g., ESG committee or audit committee). directors. Other companies including ConocoPhillips
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expertise to the Some boards may choose to appoint directors with and GM also recently added directors with ESG to their
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board or boards.
relevant specific ESG experience. Regardless of whether there
committee are sustainability experts on the board, companies
should consider whether directors should have some
minimum competency in areas relevant to the entity’s
ESG issues.
Risk management and sustainability practitioners can play a critical role in enhancing ESG-related risk
awareness at the board level by preparing information for the board (e.g., KPIs and metrics that reflect the
organization's ESG performance), determining what communication channels should be used and establishing
how frequently the information should be provided. In addition, practitioners may leverage internal capabilities
in the organization to provide informed perspectives to individual board members and/or committees on
ESG-related risks. Where appropriate, practitioners may also obtain expert third-party opinion or perspectives.

“Not every director or member of senior management can be an ‘ESG expert’ but directors and
appropriate company personnel should educate themselves on the key ESG issues facing the company
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and be able to converse comfortably on those issues that matter or present significant risks.”
Wachtell, Lipton, Rosen and Katz

For additional guidance on enhancing board awareness for ESG, refer to the UNEP’s Integrated Governance: A
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New Model of Governance for Sustainability, NACD’s Governance Challenges 2017: Board Oversight of ESG,
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34
Oversight of Corporate Sustainability Activities (Director’s Handbook Series; 2014-2015), Ceres 2018 report
Systems Rule: How Board Governance Can Drive Sustainability Performance or Eccles and Youman’s 2015
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working paper Materiality in Corporate Governance: The Statement of Significant Audiences and Materiality.

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f Woods Hole Oceanographic Institution is dedicated to advancing knowledge of the ocean and its connection with the Earth system through a sustained commitment to
excellence in science, engineering, and education, and to the application of this knowledge to problems facing society.
18 Enterprise Risk Management | Applying enterprise risk management to environmental, social and governance-related risks • October 2018