By: Michael Judin

In 2021, Sygnia Limited CEO Magda Wierzycka made a controversial statement at an investment conference that ESG investing has become a mere buzz word and argued that the governance aspect, the “G” in ESG, is already a standard for asset managers and that the focus should shift to genuine impact investing, which addresses major global challenges like food security, renewable energy and climate change.

Whilst Governance Gurus are delighted that the critically important framework for evaluating an organisation’s commitment to sustainability includes governance specifically, it is very important for people to remember that governance not only helps a company operationalise the other two critically important components of ESG, but that governance should be an integral component of every aspect of the company, and not just in the ESG context.

Remember, good corporate governance requires an acknowledgement that an organisation doesn’t operate in a vacuum, but is an integral part of society and therefore has accountability toward current and future stakeholders.  One of the main reasons for introducing the “apply and explain” regime in King IV is to ask organisations to be transparent in the application of their corporate governance practices so that stakeholders can be satisfied that good corporate governance is being practiced in every nook and cranny of an organisation. 

Governance is a cornerstone of sustainable business and the risks posed by weak governance are profound and multifaceted and can impact organisations in many ways.  In an excellent article recently published by Deloitte the authors wrote that:

“As society and politics continue to evolve in relation to ESG, it is becoming increasingly crucial for corporates to recognize and act on the critical role of the “G.” Corporate governance is foundational to responsible and sustainable business making. Hence, risks and opportunities associated with governance are expected to continue to grow in the future—with forward-looking boards and compliance functions acting in favor of good corporate governance.”

They highlight the following critically important points:

• Environmental, social, and governance (ESG) matters have seen growing interest, even from shareholders. So far, the discussion has mostly centered around the environmental and social aspects.
• A weak governance structure exposes a company to a variety of risks, including financial mismanagement, conflicts of interest, regulatory noncompliance, and greenwashing, among others.
• The board of directors plays a pivotal role in risk and compliance oversight. The board is responsible for setting the direction for and overseeing sustainable business.
• Good ESG governance considers aspects beyond regulations, including a company’s culture, risk assessment, management incentive systems, internal controls, and communication and reporting.
• Boards need strong allies to support ESG oversight and compliance professionals are best positioned to help in areas relevant to good governance.”

Bloomberg recently wrote that the red carpet is being formally rolled up for the three letters, ESG.  They have dropped the label, the acronym for Environmental, Social and Governance, and in its place the synonym “Sustainability” is now being used instead.  Others are stating that the acronym should be replaced with “Responsible Business”.

Ultimately, Good Governance underpins the success or failure of everything.  It would be sad to see the “G” disappear. 

Join me and other expert panelists for an interactive webinar hosted by the Southern African Institute of Mining and Metallurgy (SAIMM) on 1 August, where we will unpack this topic further.

Rifle-Shot Performance Holdings