In today’s business landscape, the elephantine “E” in ESG—dominated by climate action, carbon reduction, and resource sustainability—often overshadows the “S” (social) and “G” (governance) dimensions. Prof. Sam Garg, ESSEC Business School Asia-Pacific, dives into a bold idea: Decentralising CSR responsibilities across multiple board committees that break free from the traditional model of a single, centralised CSR approach.

Governance of ESG: From silos to shared expertise by Anshuman Sisodia. Related research: Shared Board Governance for Corporate Social Responsibility, conference paper, Sam Garg.

What the S! 

The Financial Times Moral Money Summit 2024 brought in powerful discussion around ESG and how its implementation can be effective. Environmental, social and governance are the three major aspects of the current responsible business landscape. For a long time, these discussions were dominated by environmental aspects of the topic. However, increasingly social aspects—like diversity, human rights, community engagement and care for well-being— are becoming important in prompting businesses to actively include social factors in their sustainability framework. These factors assess how effectively the organisation fulfils its responsibilities toward people through its internal processes, global supply chain networks, and the local communities it impacts.

Businesses around the world are slowly recognising the long-term benefits of incorporating social factors into decision-making. Companies in many regions are being encouraged by customers, NGOs, and partners to act in a socially responsible way. This not only helps improve their brand image but also gives them a competitive edge.

In many parts of the world, mandatory reporting regulations on social indicators have made measuring the social impact and efforts of companies a compliance requirement. This has become one of the main drivers for companies to focus more on the social aspect of ESG

What Holds it Back?

The benefits of being a socially responsible company take time to show and are mostly seen in the long term, making it hard for companies to build a strong business case.

Additionally, social indicators are not only slow to show results but are also difficult to measure. These factors are often hard to define and even harder to quantify. This poses a challenge for companies in prioritising them according to their importance and giving them the attention they deserve.

A New Governance Model is the Key 

At the FT Moral Money Summit, Prof. Sam Garg and fellow panellists highlighted a pressing challenge: the lacklustre engagement of companies in meaningful social initiatives. Prof. Garg emphasised the need for a structural change in how corporate social responsibility (CSR) issues are governed within organisations. His research investigates the concept of shared board governance in corporate social responsibility, where CSR-related roles and responsibilities are distributed across multiple board committees. 

Traditionally, CSR oversight has been centralised within a single board committee. However, Prof. Garg’s study challenges this paradigm, advocating for a shared governance model where CSR-related roles and responsibilities are distributed across multiple board committees. By doing so, companies can harness the unique expertise of different committees, enabling more holistic and effective engagement with social issues.

Drawing from an analysis of S&P 500 firms, the research reveals a striking insight: firms with shared governance structures consistently outperform their peers in CSR performance. As such, the impact is most pronounced in companies that not only implement shared governance but also establish a dedicated CSR committee and encourage overlapping committee memberships. This interconnected approach fosters collaboration, enhances decision-making, and strengthens a company’s ability to deliver on its social impact goals.

The study underscores a critical yet often overlooked factor in ESG performance—board committee structure. Governance mechanisms must evolve beyond compliance to facilitate meaningful collaboration and innovation in addressing environmental and social challenges. As stakeholder expectations for accountability continue to rise, firms need governance systems that are both agile and collaborative

Prof. Garg makes three recommendations to boost the effectiveness of social impact initiatives. The first—establish a CSR committee which can coordinate efforts, ensure alignment, and drive the firm’s social impact agenda. 

The second is to adopt a shared governance model to distribute CSR oversight responsibilities across multiple board committees to leverage specialised expertise. As mentioned earlier, the CSR committee is useful only with the shared governance model. Interestingly, just having a CSR committee does not produce3 any statistically significant effect on the firms’ CSR. 

Additionally, in his third recommendation, Prof. Garg urges companies to optimise board committee memberships to encourage directors to serve on multiple committees to enhance cross-functional communication and cohesive CSR strategies.

Compliance to Stewardship

By reimagining how board committees collaborate on CSR, organisations can transform complex social challenges into opportunities for meaningful impact. Effective governance is not just about compliance—it’s about stewardship that inspires change and creates value for all stakeholders.

As companies grapple with the escalating demands of ESG accountability, the governance of CSR emerges as the linchpin. Firms willing to rethink their board structures can unlock new potential to lead with purpose, create shared value, and leave a lasting mark on society.

Useful Links:

• Link up with Prof. Sam Garg on LinkedIn
• Read a related article: Board of Directors’ Duties Mitigating Climate and Human Right Risks
• Discover ESSEC Business School, Asia Pacific
• Apply for the ESSEC MBA.

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