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Most likely, you’ve been selected out of between 50 and 400 candidates for this Board role, which should give you that little confidence boost and feel good already. And there’s something in your experience and style that’s caught the recruiter’s attention. Also remember “Your country needs you – to be a non-exec director” – great article from Martha Lane Fox

Now for the tougher news. You’re likely in a pool of 3 to 10 people who all have excellent seniority and skills. How do you stand out? What are the key elements of preparing for a Board role interview?

First, find out where you are

If you’ve been invited to an interview with the recruiter, you may be on the longlist, which means the Board you’re aiming for hasn’t yet vetted your profile. Most Board level recruitment is quite well codified, with cut-off dates and interview days planned well in advance. It’s completely all right to ask the recruiter where you stand. This is also an opportunity to connect. To show confidence and excitement, be personable and, if you can, find out what they found interesting about you. You can then reinforce the right messages and address areas of perceived weakness. It will also show you are serious, and busy, but willing to collaborate through the process.

Once you’re on the shortlist, you will likely be asked for references. They’re a great opportunity to pick the right people – not only connections who will advocate for you, but who will do so in a way that is relevant to the organization. Try and select one or more sponsors who are senior enough, will make themselves available, and will be credible in the eyes of the reviewers. Though the request will be for character references, you will want someone who has worked with you for at least a couple of years, in recent years.

It’s now time to do your due diligence about the organization

– a key part of preparing for a Board role interview

Do you actually want to work with them?

It’s important that you really are motivated, and to be clear and able to express your motivations. A Board is unlikely to choose someone if they are not sure about your agenda for joining and that you are truly committed to their vision or to what you will stand for as their NED.

What are their strategic challenges?

This is likely to be another question you will need to discuss. Use public information to develop your perspective. It may seem like hard work, but reading their latest reports and following news coverage will make a big difference. It’s also entirely ok to look into your network and try and get an expert perspective from friends working there, past team members or, at least, connections in the same industry.

Are any regulations set to change in the near future, or have they changed recently?

Your target organization may be in a regulated industry. If so, you should brush up your understanding of how it is regulated, key norms and players. That is likely very relevant to the upcoming discussions. Don’t feel like you don’t know – the Board is not necessarily expecting you to be an expert, unless they stated so. Asking “what is your position in regards to the upcoming XYZ?” may help you trigger a good conversation, and show up as an attuned candidate.

Try and find out who the Board and executive team are.

Most websites will have this information, and Boards may be listed on Companies House, and looked up on LinkedIn. You can then understand what’s important to them, what skills may be dominant or missing, and what their agenda are. If new key leaders have recently joined, what will their big bets be? Again, if something triggers your curiosity and you cannot find an obvious answer, you may jot it down into your list of questions for discussion.

After or parallel to due diligence comes the actual preparation.

Make sure you feel comfortable with how you will answer the following questions :-

• What is a Board role to you?
• Why are you interested in joining this particular Board?
• What skills or abilities will you bring?
• Are you willing to commit for the long term, and how will you make time for this new Board role?
• What might you be missing, and how will you address or make up for it?

Review your cover letter.

Ideally, your thoughts are expanding on what you had drafted. If that is not the case, why? Have you found out anything new? A recruiter will look for consistency as a proof of honesty, so if things changed, you may want to point out why. For instance, “while doing due diligence / based on your latest announcement, I…”

Articulate clearly why your experience will be valuable to the organization

or how it reflects their value or a common mission. Don’t assume it is immediately clear, especially once they will be talking with several people. Be memorable in your anecdotes, but make it about this team, not about your past. This will show focus, humility and give them a taste of what they will get by bringing you on Board.

Write down a few key points for review

If the interview is by video, you might even keep your notes handy. In a room, it depends on your level of confidence, but having a notebook with key points could be acceptable depending on context, for reference or completeness.

It’s also completely ok to take notes as you go, or write the names of the people around the table during a panel. If your interview is by video, it’s a good idea to let your interlocutor know you will be taking notes, so they won’t assume you are distracted.

Mark also at least 10 questions

Some will be answered “naturally” or become irrelevant in light of the conversation, and you will always want to have something to ask. The best way to impress a panel is not talking about you, but asking or raising a point about their organization that will make them want to discuss.

Finally

Remember to be well rested, arrive on time, and show positivity and engagement. Dress code is likely to be formal, but should also reflect you and the organizational culture, there’s no need to overdo. Shaking hands is usually good if in person, walking around the table. You can do the same digitally if set up allows, with a few friendly comments. Even if time is short, human connection is important. However, do finish on time. If by any chance your meeting starts late, ask how much time you will have, and acknowledge the interviewers will have a busy day.

The post Preparing for a Board role interview appeared first on Transpire Global.

You’ve got years of CEO experience under your belt and you’re fired up to use it in a role as an NED. It’s a common scenario – but while it’s likely that you have a great deal to offer, you may have to invest more time and effort into growing your network before you get started.

Finding NED roles can be hard work. They often won’t be advertised, instead being passed on by word of mouth. So, if you want to hear about potential openings, it’s crucial that you are talking to the right people.

A survey by Board Appointments revealed that only 20% of NEDs are found through headhunting and job advertisements. On the flipside, 65% came through a personal connection and 15% from somebody approaching a company directly.

Finding an NED role through your personal network doesn’t mean that you won’t have to make an official application, though. Most NEDs in the survey said they had to complete a written application, and many also had to deal with recruiters at some point.

This means that, alongside the effort that goes into nurturing your community of board-level professionals, you will also need to invest time in polishing your CV (use our guide on how to create a CV for a Non-Executive Director role to help you).

Who should potential NEDs connect with?

Your role as an NED involves leadership thinking at Board level, so it’s important to nurture connections with senior professionals who have Board experience themselves. These are the people who will hear about new openings as they arise.

But building contacts isn’t just about hearing about new NED roles. If you have the right network for a particular business, it’s also a selling point when you apply.

Be strategic in your approach. The companies you apply to will want to know that you have the right network for their needs. For them, it’s all about who you can bring in to their business and the introductions you can make that will benefit them. 

Consider these questions as you build your community: 

• What companies will you be applying to?
• What contacts will be attractive to them?
• What are their strategic aims and objectives and what type of people do you know who can help them reach these aims?
• What industries and specialisms do you want to work in?

Being clear about these points will help you grow your network more efficiently rather than wasting time talking to the wrong people. Go for quality over quantity – having a smaller number of well-targeted, high-level connections will be more worthwhile than endless people who are irrelevant to the posts you’re going after.

Using this approach, you will know exactly what contacts you have that are useful to the business you’re talking to when it comes to interview time.

How to grow your personal community

Now comes the real work of getting out there and making connections. There are lots of in-roads to meeting new people, so try to make it a natural part of everything you do, whether you’re working at home or out and about.

Stay alert to opportunities, even at times when you might not expect to meet the right person, such as events at your children’s school or a casual evening out with friends.

Use these ideas as starting points:

1. Nurture LinkedIn 

Remember the quality over quantity rule here. You may well have hundreds or even thousands of LinkedIn connections already – but how many do you interact with or know personally?

Take time to respond to the posts of people you want to develop a relationship with. Take interest in what they’re doing to make your connection more meaningful.

It’s also worth finding relevant groups on LinkedIn and becoming active within them. This will put your profile in front of the right people and make your name more familiar to them.

2. Attend events and meetups

This is easier to do than ever, thanks to the surge of online events post-pandemic. Take a targeted approach, or you could spend your entire day on Zoom or travelling to events.

Look at the delegate list before you attend if it’s available and turn up prepared to meet a few key people. Always connect with the people you talk to on LinkedIn and send a brief follow-up message the next day to establish the relationship.

3. Invest time in one-to-one meetings

Now you’ve spent time nurturing new relationships on LinkedIn and at events, it’s time to reach out to the most relevant contacts and arrange a one-to-one meeting. Be upfront – explain that you’re looking for an NED role and explain what you’re after so they can contact you if anything arises.

4. Demonstrate thought leadership

This is all about building a personal profile to showcase your knowledge and experience. It will help to attract more people into your personal network, and it also looks impressive when you apply for NED positions.

Take time to post thought-provoking posts relevant to your industry on LinkedIn and look for opportunities to talk at webinars and events. 

5. Join relevant trade associations 

Many trade associations have their own networking activities that are only open to members, as well as online databases encouraging people to connect. These can be invaluable in meeting people within a specific industry.

6. Build contacts through pro bono work

Getting your first paid position on a Board can be tricky, but offering your expertise pro bono to a charity or startup is the perfect way to get your foot in the door. Not only will it give you experience for your CV, it will also help you to grow more Board-level contacts.

How Transpire can help you build your NED network

Transpire Community Connect is our community hub that helps you build your network, meet industry-leading NEDs all over the world and showcase your talents. 

Through this online peer group platform you can:

• View member profiles and make personal connections
• Harness the power of the Transpire Network by asking questions, posting articles and joining discussions
• Learn about, sign up for and join CPD & Networking Events, both Open Sessions and Members-Only Faculty-Led events

We also run members-only events where you can network with peers and learn about topical issues facing boards from recognised thought leaders.

Our events programme covers topical issues facing boards today, with live discussions and networking for our members. 

Find out more about Transpire membership and how it can help you grow your network.

The post How Non-Executive Directors can build their professional networks and find work appeared first on Transpire Global.

Background/Motivation

In September 2022 I formally joined the Board of Milestones Trust. This is my first Trustee position and an important step in building my own portfolio NED career.  I have worked as a volunteer management consultant and CEO mentor with Cranfield Trust for some time. I was keen to build on this experience, perhaps by supporting a charity in more of a permanent capacity. A colleague and Transpire Member approached me in the summer to ask if I was interested in speaking to an existing Milestones Trustee (and Transpire Speaker). I jumped at the opportunity!

Recruitment Process

That was the start of an interesting journey which after my initial conversation included a further 4 interview stages. With the Chair of Trustees, other Trustees, Executive team members and finally with services users – people who Milestones has helped.

Having the opportunity to not only meet service users but giving them the opportunity to interview a trustee was fantastic. Incredibly insightful and really struck a chord with my own values.  I firmly believe that a Non-Executive Director (NED) or Trustee should have an understanding of how the organisation’s purpose is lived and played out.  Therefore hearing at first hand service users’ problems and challenges and how Milestones has helped them was particularly enlightening.

The right role for me/Could I add value?

To help me through the process felt I needed a framework or structure  to help me decide if Milestones was right for me and whether I could add some value to them. Therefore I posed myself some questions that served well as a sense check, namely:

• Why do I want to be a trustee of Milestones? Why them?
• How does the purpose of the charity align with my core values?
• What product or skills do I bring into the board room?
• Why would they want to appoint me?
• How can I help them achieve what they want/need to do?
• What are their challenges? Are these in my field of expertise?
• What will I learn? What do I feel I need to learn?
• What is the time commitment? Can I give the role sufficient the time and consideration?
• Where are the board meetings held?

These questions proved invaluable in reaching my decision. It’s also fair to add that I still ask myself some of these questions, and will probably continue to do so.

What has the first few weeks looked like?

I am very aware I am still in my induction period, and will continue to be for some months, as I feel I need to really understand the issues. Milestones have put together a comprehensive programme including; requirements of a trustee, safeguarding as well meetings with the chair and CEO.  In addition I am attending each of the committee meetings in order to gain an understanding of the issues before they reach the board, plus attend the strategy day next month.  I have already decided to permanently join the Governance & Risk and Finance committees.

Early in the new year I will start to visit the supported living service sites to meet staff and service users alike which for me is key, as I don’t feel I can effectively fulfil my duties as a trustee without that understanding.

The post Finding the right Trustee role/Can I add value? appeared first on Transpire Global.

How can your NED Portfolio capture the attention of a prospective board?

As well as your Board CV that Transpire will help perfect, your back story needs to be a little more eye-catching and different.  This means your website if you have one, your social media pages and everything that goes with it. 

Transpire member Marla Ubhi of Marla Investments was looking for that differentiator too.  Marla’s expertise is in the world of Mergers and Acquisitions which is a dry and boring space populated by stereotypes.  Marla was very keen not to risk being placed in the same bracket and was fascinated watching Transpire Trusted Partner Ralph Mann of Purple Heron live illustrate all the major and relevant points in a Transpire webinar. The illustration was not only beautifully drawn but explained effectively what had been said.

She contacted Ralph to create her a Visual Identity.  Ralph spent a long time talking to her over a week and getting to understand her personal values and her personal brand.  He researched and truly understood the ‘how’ and ‘why’ of her approach of bringing emotional value to the businesses and SME owners in the Mergers and Acquisitions she did.

He translated and synthesised these key elements in an understandable, engaging, and memorable graphic. This really works in her business context, injecting her personality into her comms. In one illustration it encompassed everything that Marla stands for and through exploring the narrative of YOU produced standout digital graphics to take to market.

The graphic above that Ralph created wove together the eight parts of Marla’s unique offer.

1. The DNA of Business:  How Marla gets to the core of what Business are, what their secret sauce is and what makes it unique and successful.
2. Unlocking Value: How Marla helps her clients put all their assets on the table and maximise the credibility of the business they are selling.
3. Emotions: Selling a business is emotional and making the decision to exit is fraught with different emotions.  Marla believes that putting the emotional value and the legacy of the business at the heart of all conversations is vital.
4. Care: The most valuable assets of any business are the people.  Marla believes that caring about those people is the secret to creating value in any business.
5. Deal Process: Graphic taken from a more detailed version detailing the two pathways Marla offers the seller and buyer for a successful merger.
6. Cogs: Marla’s skill is in pulling teams together, seeing which ones don’t work and knowing who to send in to fix them.
7. Listening: Marla’s skill of not just hearing what the business owners are saying, but attentively listening and acting upon it.
8. The Emotionally Intelligent Workplace: Marla helps businesses hear what they are feeling, facilitating productivity as staff are acknowledged, celebrated, supported.

A well-designed illustration makes the unfamiliar, familiar, and also relatable. The effect on people seeing the illustrations is a conversation starter.  Curiosity about the meaning behind the pictures, encourages people to start a dialogue, the hardest part of selling yourself.

When you are looking for a NED position, being able to talk through your values in the picture is a lot of more attractive to both you and the board. The conversation is always easier and flows better because it is easy for a potential NED to talk about everything that they offer and that matters to them. Illustration overcomes this,

It is The Visual Articulation of YOU.

The post Visual Identity – On the NED journey appeared first on Transpire Global.

Unlike the gender pay gap, there is no legal requirement for companies to publish their ethnicity pay gap. However, it’s likely there will be a number of companies reporting this data for the first time in their 2021 annual report and accounts.

For this blog, I wanted to look at the popularity of measuring and reporting the ethnicity pay gap and what we can learn from this evolution.

The popularity of ethnicity pay gap reporting

PwC published the results of a survey of 100 companies in September 2020, which found that the number calculating their ethnicity pay gap has grown significantly in recent years:

• 67% are now collecting ethnicity data on their employees, up from 53% in 2018
• 23% are now calculating their ethnicity pay gap, compared to 5% in 2018.

But not everyone is keen to report pay gaps. The report of the Commission for Race and Ethnic Disparities, which was published in March 2021, found that whilst ethnicity pay gap reporting is a potentially useful tool, it needs to be approached with care. 

The Commission recommended that whilst a number of employers (such as the NHS) have already published their ethnicity pay gaps, “we believe that ethnicity pay gaps should continue to be reported on a voluntary basis and that the government should provide guidance to employers who choose to do so”. 

The report went on to say that where employers choose to publish such data, care should be taken to break figures down by different ethnic groups.

Of those organisations that do not calculate their ethnicity pay gap, the most common reason was due to a lack of ethnicity data. This lack of data was reportedly caused by GDPR concerns, low response rates, HR system capabilities or unease around questions about race and ethnicity.

Looking at an example of pay gap reporting 

One group that has already published its race and ethnicity pay gap is Capita plc, making it one of only a few FTSE organisations to do so. Capita reported their ethnicity pay gap, comparing average earnings of Black, Asian and minority ethnic colleagues as a percentage of White colleagues. 

Ethnic minority employees’ pay gap compared to White colleagues

The results show a black, Asian and minority ethnic median pay gap of 13.8% and a mean of 12.5%. By comparison, Capita’s gender pay gap for the same year was a median pay gap of 20.2% and a mean of 24.2%. Capita states that the ethnicity pay gap is driven by having more white colleagues in the upper pay quartile. 

Capita acknowledges that there is more to do and it has expanded its cross-company mentoring schemes and reviewed its employee life cycle processes to look for ways to remove bias and provide equal opportunities.

More information about Capita’s diversity and inclusion objectives can be found in Capita’s Annual Responsible Business Report.

The post Race and ethnicity pay gap reporting – an NED’s perspective appeared first on Transpire Global.

Most leaders understand the benefits and believe they have high levels of self-awareness – but is that actually true and if so, what can you do to improve?

Organisational psychologist and executive coach Tasha Eurich has spent years studying what it means to be self-aware. After 10 separate investigations with nearly 5,000 participants, her team found just 10–15% of people are truly self-aware, even though the vast majority thought they were.

We looked at what it really means to be self-aware and seven ways you can work on it, so that you can help boost your performance as an NED.

The two main types of self-awareness

There are two types of self-awareness, according to Tasha, and both are important to effective leadership.

1. Internal self-awareness

How clearly you understand your own values, fit with your environment, reactions and impact on others.

2. External self-awareness

Understanding how other people view you in those areas.

External self-awareness is particularly powerful for NEDs. The greater the coherence between your self-perception and how members of the management team see you, the easier it is to build trust and communicate.

Introspection doesn’t guarantee self-awareness

Interestingly, Tasha’s research found no correlation between internal and external self-awareness. She discovered that it’s really common for people to have a clear sense of their inner workings without fully understanding how they’re perceived by others.

So, how can NEDs develop their self-awareness and become better leaders?

We’ve shared seven practical steps you can take to improve your self-awareness below and recommend watching Tasha’s TED Talk.

Seven key ways to improve your self-awareness as a business leader

1. Get feedback

Actively seeking out and valuing other people’s opinions improves the understanding you have about yourself.

Experience can give people a false sense of confidence. This is a particularly dangerous trap for NEDs, who have normally had long, successful careers.

Try setting aside time to ask someone in your network – your coach or mentor if you have one – to review your performance. That could be scheduled once every quarter or every six months depending on the depth of your engagement.

2. Assume positive intent

Feedback about your performance or conflicting opinions on tackling a situation can feel negative – and it’s easy to get defensive. You might become fixed on justifying your stance, rather than being open-minded and learning.

To avoid this, give the people you’re working with the benefit of the doubt. Step back and try to assess the situation, so you can do a better job of understanding their position and how you’re being perceived. 

3. Make space to reflect on your performance

Life can be hectic for NEDs and business leaders. It’s easy to slip into a frenetic way of operating – and fail to give yourself the time to reflect and learn.

The benefits of reflection are immense. It allows us to develop new approaches to problems, learn from situations and understand ourselves better.

Booking time in your diary to look at particular projects or making space to think about things more generally will help you develop as a leader. That could mean deep-diving into some data or simply taking a walk to process your thoughts.

4. Ask “what” rather than “why”

As noted above, there’s no clear link between having good internal and external self-awareness. While introspection can be incredibly positive, we’re not always that good at it.

We tend to simply repeat our existing thinking or thought processes, which entrenches biases and fears, rather than getting us closer to the truth.

Tasha suggests asking ourselves “what” rather than “why” when self-reflecting. “What” questions give us the power to move forward because they lead us towards insights we can act on.

Here are some examples of turning “why” questions into “what” questions:

1. “Why is the CEO failing to motivate his sales staff?” “What types of communication does the CEO have with his sales staff?”
2. “Why wasn’t it possible to turn around a failing company?” “What steps did we recommend the leadership team take?”
3. “Why am I qualified for this Board role?” “What capabilities can I bring to this Board role?”

5. Be authentic

Authenticity is a key driver of trust and good communication, making it a fundamental pillar of effective leadership.

Being authentic is acting in a way that shows who you really are, without changing your behaviour to please others. It takes courage to be truly authentic in leadership roles. 

Striving for authenticity and building your self-awareness go hand in hand.

6. Assess the models you use

A big part of an NED’s role is helping leaders understand situations and providing advice drawn from experience.

The danger is that the models and situations you rely on go unchallenged and fail to develop over time. 

Part of being self-aware is investing in learning and developing the views you hold:

• Look for dissenting views on approaches you recommend
• Write out and examine the premises in your argument
• Challenge assumptions based on the performance of a similar type of company or leader

7. Think about your offer as an NED

Whether you’re drafting a CV for your first NED role or are an experienced Board member, it’s important to work on the service you offer. A sparkling corporate career or entrepreneurial success story isn’t enough on its own – it needs to be developed into a compelling NED offering.

It’s important to carefully think through your USP. You’re seeking to enter a brand new marketplace. In the same way you would advise a company to evaluate their strengths and weaknesses before entering a new market, you should do the same.

Get help becoming more self-aware

Transpire helps its members excel in Board-level roles through education, community and mentoring. We believe being more self-aware is critical to developing as a leader and an NED. 

If you want to develop your capability as a leader, check out our Stepping Stones programme, High Performing NED’s Toolkit or One to one coaching.

The post Why being self-aware is critical for NEDs – and seven steps you can take to improve appeared first on Transpire Global.

Like me, you probably click around the FCA’s and PRA’s websites, but remain sure you’ve missed something you really need to know. You leap upon regulatory updates emerging from your own organisations, on the basis they should have highlighted the relevant changes. After all, following these changes could be a full-time occupation in itself. 

I find that law firms and “Big Four” accountants are another good source of information and provide easily readable summaries. Linklaters, for example, have produced a particularly helpful summary of the changing landscape in their recent Financial Regulation Horizon Report.

The challenge of keeping up to date isn’t going to get any easier, with 2022 promising to be a mega-year for consultations and regulatory change, for example:

• Prudential regulation: 1st January 2022 saw the Investment Firms Prudential Regime come into force. Detailed guidance and a new handbook are yet to come.  
• Consumer harm: The FCA finalised its guidance on the treatment of vulnerable customers, to apply across the industry and for which firms will need to provide evidence.
• Future Regulatory Framework: The UK government’s consultation closed on 9th February.
• Environmental, Social and Corporate Governance (ESG): The integration of ESG risk into prudential risk management frameworks.
• Pre-paid funeral plans: Firms that enter into and administer funeral plan contracts (including those sold before FCA regulation) will be regulated from 29th July.

The role of an NED in keeping up to date with regulation

As an NED it has, therefore, never been more critical to stay abreast of the changes, so that you can be asking those “conceptual clarifying questions” that help your firm to respond to the changes. 

For example, if you’re with an IFPRU firm, you’ll know that Investment Firms Prudential Regime (IFPR) now applies. That means your firm needs to immediately transition its capital and liquidity models from the old ICAAP approach, to the new Internal Capital Adequacy and Risk Assessment (ICARA). 

Although the underlying aim of IFPR remains to ensure that firms have adequate capital and liquidity, the focus of the firm’s risk management framework is now based on harms to customers and markets, as opposed to categories of risk. So, for example, you could ask how this harms-led approach is being implemented by your firm: how are harms being identified, mitigated and monitored? And, critically, do the firm’s principles align with this harms approach?

Making sure you know the regulatory changes will help you ask the relevant questions.

The post Knowing your ARGA from your elbow: An NED’s guide to keeping up-to-date with financial regulation appeared first on Transpire Global.

The post How to create a CV for a Non-Executive Director (NED) role appeared first on Transpire Global.

With this in mind, Transpire commissioned the Sustainability for Boards report on how ESG affects companies and their Boards of directors. 

The report sets out to understand how ESG influences companies to include information about sustainability in their annual report. It also looked at how businesses incorporate ESG in corporate governance, core operations and the workplace culture.

If ESG is an area that you need to address, this article will help you understand the common challenges and get ideas from real-life examples and you can download the complete report at the end of this post.

What is ESG?

ESG stands for environmental, social and governance. It recognises that business decisions usually affect not just shareholders, but also external parties, and that they also have a vested interest in how the company is run.

For this reason, the ESG model puts a business’s stakeholders at its heart – its customers and employees, but also wider external stakeholders like the environment and communities. 

When your business develops an ESG report, you’re essentially setting standards that you agree to operate by. This means you’re committed to working within an ethical framework that benefits your people and the planet.

One interviewee in our report summed it up well: “It’s increasingly important because the expectation from shareholders is growing and more and more people are reporting on ESG factors.”

The Board plays a crucial role in addressing and driving the ESG agenda in a company. You are responsible for setting the strategic direction of the company, and sustainability is an integral part of this.Tony Stubbs, CEO of Transpire

The three core elements of ESG

Let’s look at what this means in practice by breaking down each area of ESG.

1. Environmental

This is about how your business considers the preservation of the world’s ecosystems. It includes your attitude to:

• Climate change
• Reducing carbon emissions
• Air pollution
• Water pollution and water scarcity
• Deforestation

2. Social

The social part of ESG looks at the impact of your business activities on the many people it serves and their interdependencies. For example:

• Customer and community relations
• Data and security
• Diversity and inclusion
• Mental health

3. Governance

How the logistics and processes that run your company have an impact. This might include:

• The set up of the Board of directors 
• Hiring and onboarding practices
• Executive and venture partner compensation
• Political relationships, like contributions and petitioning

While the balance between the three elements of ESG often depends on your industry, there is generally more weight and attention on environmental issues.

This may be because the environment has been part of the regulatory requirements for a long time. It also has relatively clear and structured metrics and KPIs.

In comparison, the social elements of ESG can be more narrative in nature. For this reason, companies often find it harder to set meaningful, easy to measure metrics.

Why are Boards motivated by the concept of ESG?

An ESG report not only helps improve your company’s relationship with stakeholders, it can also help you to obtain investments that are crucial for driving the business forwards.

This is backed up by current trends. Funds focussed on ESG-related issues recently saw their combined assets climb to $3.9 trillion, and spending on ESG data is rising, with an annual growth rate of 20%.

“Consumers and investors are shifting to sustainable products and investments and companies that make positive social contributions,” said Transpire Founder and CEO Tony Stubbs. “This means the Board must ensure they adapt to the evolving nature of the market and adopt a strategy to allow the firm to make a sustainable profit.”

What role does the Board play in setting the ESG agenda?

The Board plays a crucial role in addressing and driving the ESG agenda in a company. You are responsible for setting the strategic direction of the company, and sustainability is an integral part of this. 

We asked interviewees what the role of the Board is when it comes to ESG. There was a consensus that the Board is responsible to set the tone from the top, determining how much priority is given to ESG.

“I think the Board has to be intrinsically and fundamentally involved right from the very beginning of this process,” one interviewee told us. 

“The Board can say, ‘management, we now want you to identify concrete actions and KPIs that we can measure. And then you tell us how they are aligned with the long-term objectives’.”

Does an NED need specific skills for ESG?

NEDs need good ESG knowledge to be able to challenge and question the management team on its integration. 

Our research found that a specialised ESG committee can be beneficial to some companies, but it’s more important that ESG is fully integrated into the strategy of the company, with or without a committee. 

“Some of the bigger firms have specialised committees, although that might not necessarily be appropriate for every organisation. So I think it’s really important for firms to take a proportional approach to how they tackle ESG,” one interviewee said. 

“I think certainly, most governance committees within the firm should be thinking about how they embed ESG into their activities and into their terms of reference.”

It’s also essential for the Board to be diverse in its composition to ensure that all aspects are considered when discussing ESG at the Board level.

Challenges of producing an ESG report

Even with the drive and determination to approach ESG in a meaningful way, leadership teams can still face a range of challenges when producing a report.

These might include:

• Difficulty finding the right framework and standards for reporting 
• Adequately communicating the changes the company is making 
• Satisfying each stakeholder group
• Lack of ESG data
• Lack of knowledge at the leadership level 
• Ever-changing regulatory requirements

Our research also found that before producing an impactful report, companies may face challenges in aligning the purpose of the company with its employees and achieving its ESG targets at all levels in the organisation.

Types of ESG reports

There are two common ways of reporting on ESG. The first is to include it as part of your annual report and the second is to create a separate ESG report.

There are pros and cons to each method. Having two separate reports may allow you to better engage with specific stakeholders and provide more detailed information.

However, by having only one report, it can encourage you to integrate ESG better by considering it in the context of your company, rather than just in general. 

How are other companies approaching ESG?

We examined the annual reports of several companies from various sectors and countries listed on the Financial Times Europe Climate Leaders 2021 list. 

The most obvious similarity between all the reports was using the United Nations Sustainable Development Goals (UN SDGs) as a guideline or benchmark. All the businesses align their ESG targets with the UN SDGs and most of them are signatories or participants of the UN Global Compact. 

Ten out of the 13 companies also included sustainability reporting indexes, such as CDP Scores and FTSE4Good, in their annual reports. 

Some companies focus on one aspect of ESG more than the others. Superdry is a good example, with two environment-related goals and one social-related goal as its main areas of focus. 

This focus on the environment and climate change may be linked to the fact that its stakeholders see the environment as the most important aspect of ESG.  

How to integrate ESG successfully

Integrating ESG successfully needs buy-in across the organisation. We’ve put together these recommendations to help you do it well, based on the findings of our research: 

For companies

• Work with ESG experts in setting the business strategy and ESG direction of the company to elevate your initiatives and reporting.  
• Provide ESG training and education for your employees to help them understand how to incorporate ESG into their daily activities and tasks. This can also help to create an ESG-positive corporate culture in the company.  
• Maintain positive relationships with your stakeholders by engaging in continuous two-way communication with all groups.  

For small businesses and start-ups

• It’s a good idea to integrate ESG into the company’s strategy and core purpose from the set-up. As your operations are on a smaller scale, it’s often easier to initiate changes at a faster rate.  

For Board members

• Invest in your ESG education and skills to help you lead and engage in all conversations around the topic. 
• Set the right tone at the top leadership level. If all Board members take a strong stance in ESG, companies should find it easier to align the values of the company with all its employees.  
• Continue to put pressure on companies to be more innovative in being sustainable. Constant emphasis on ESG will keep it at the top of the agenda, especially at the Board and management level. 

Download our report to find out more

There’s lots to think about when addressing ESG at Board level. Our in-depth report includes more information about the role of the NED in driving ESG forward and further recommendations for Board members.

Read in detail about the challenges other companies have faced and learn from how they have structured their reports.

The post The role of boards and NEDs in setting the ESG strategy appeared first on Transpire Global.