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Video | Jun 2020

Defining ESG

Ep. 3: What important issues already being tracked and measured in your company can be further defined as environmental, social, or governance-related?



Mark: But some of these issues have been addressed by compensation committees and boards in companies for some period of time. Some of the newer issues that are not really new but at least are getting more publicity, such as the social issues, are addressed by all companies. But haven't a number of industries been dealing with some of these issues for quite some time, especially on safety and environmental issues?

David: Well certainly, take utilities as probably the major example, which is the industry that has used more of these measures than any other industry. They've had sort of the advantage if you will, that because regulated utilities are not allowed to just continue making more and more money, at some point they have to start giving this back to their consumers and rate decreases. They actually have had a more balanced approach, and with their very long-term investment cycles with power plants and things like that, they've had a big focus on efficient use of energy and those kinds of things. So they've had that advantage of less emphasis on current financial results, more emphasis on the need to manage their investments long-term. I think more and more organizations are starting to recognize that as part of sustainability they've got to create that balance. That is going to cause some compensation committees to start to put in environmental measures.

Mark: What about other industries? How are they thinking about these?

Deb: Well, I think there are certainly some industries where you have to think about safety because it's the nature of what you're doing. But a lot of other industries that maybe don't have those same kinds of issues are focusing now on the social issues. Obviously we're all thinking about #metoo, we're thinking about pay gaps, we're thinking about pay equity. And to the extent that you can put some disclosure—and this is all at this juncture voluntary disclosure—in your proxy that discusses how you're dealing with, or reporting, or addressing any kind of issues that could make your company a better place to work on a social level and promote employee prosperity and health. I think that's an issue that a lot of companies are now turning to.

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