A prominent securities regulator recently observed that “ESG no longer needs to be explained.” ESG is firmly ensconced in the mainstream of corporate America, a frequent topic in boardrooms, C-suites, investor meetings, and regulators’ remarks. Perhaps less obvious is that ESG has yet to be mainstreamed, as it were, in internal corporate governance and operations at the individual company level. In order to be a meaningful factor in effectuating corporate purpose, ESG—or, more accurately, EESG (including Employees as well as Environmental, Social, and Governance)—must be integrated throughout corporate affairs, not just in the boardroom.

The internal mainstreaming of EESG is the next step in its remarkable journey from activist wishlists to board and regulatory agendas. The good news is that this should not be difficult for most organizations to accomplish, so long as corporate leaders recognize that engaging with EESG considerations is not something that happens “elsewhere,” but “everywhere.” When EESG is integral to the culture and values of a company, it will naturally be incorporated in the work that is done throughout governance and operations, including strategic planning, risk management, compensation, communications, and disclosure. This approach to EESG is beneficial in a number of important ways: It is conducive to long-term value creation and responsive to investor interests; it improves efficiency and transparency while demonstrating commitment to EESG goals; and it can help forestall legal liability and reputational harm.

Investors See Value in EESG