Originally published in Governance Directions Journal by the Governance Institute of Australia
Why Governance Matters More Than Ever
Having spent over a decade working within large organisations in senior sustainability roles, I've had the privilege, and at times the misfortune, of seeing governance at its best and worst.
Governance is more than the mechanics of oversight or compliance.
It is the framework that ensures organisations act ethically, responsibly, and sustainably. In a rapidly changing world, where expectations for transparency and accountability are soaring, board-level ESG governance provides the foundation for long-term success.
Governance: A Framework for Sustainability
Good governance begins with recognising that sustainability is no longer optional; it is integral to an organisation's success.
In my book, How to Build Sustainability into Your Business Strategy, I outline the characteristics of effective governance:
The Three Pillars of Effective ESG Governance
1. A Diverse and Informed Board
- Directors with ESG expertise and lived experience
- Diversity of thought, background, and perspective
- Ongoing education and capability development
- Access to independent ESG advisors and expertise
2. Transparent Accountability Mechanisms
- Clear ownership and responsibility for ESG outcomes
- Regular reporting to board and stakeholders
- Integration into executive KPIs and remuneration
- Independent verification and external assurance
3. Integration of ESG into Strategic Decision-Making
- Sustainability embedded in business strategy, not siloed
- Material ESG issues linked to business priorities
- Risk and opportunity assessment at board level
- Long-term thinking balanced with short-term performance
Governance must extend beyond the boardroom, shaping an organisation's culture, operations, and relationships with stakeholders.
A Pivotal Moment: Reframing Climate for the Board
One pivotal moment early in my career involved working with a board deeply resistant to addressing climate change.
The Challenge
Their position was that climate concerns were irrelevant to their industry, a perspective that put the organisation at odds with growing societal expectations.
The Solution: Reframing the Conversation
Rather than focusing solely on environmental responsibilities, I demonstrated how sustainability could deliver tangible business benefits:
- Cost savings: Energy efficiency and waste reduction
- Reduced risks: Regulatory compliance and supply chain resilience
- Improved operational efficiency: Process improvements and resource optimisation
- Competitive advantage: ESG credentials in tenders and client engagements
The Result
This reframing not only shifted the board's mindset but also unlocked new opportunities for the business.
With a robust sustainability strategy in place, we gained a significant edge in client engagements. Prospective clients valued our ESG credentials, and I saw firsthand how these efforts helped our sales teams win contracts and build lasting relationships based on trust and alignment of values.
This is the power of good governance: it doesn't just mitigate risk, it creates commercial advantage.
Learning from Tragedy: Rana Plaza and the Need for Oversight
The devastating collapse of the Rana Plaza factory in Bangladesh in 2013 is one of the most harrowing examples of governance failure.
The Facts
- Over 1,100 workers lost their lives
- Unsafe working conditions
- Supply chain feeding multinational brands
- Immense reputational damage to associated companies
The Lesson
This tragedy highlighted the urgent need for governance frameworks that extend to third-party relationships, ensuring accountability across complex supply chains.
The Australian Context
The Rana Plaza incident serves as a powerful reminder for Australian companies with offshore supply chains. It emphasises the need for:
- Rigorous supplier audits, Regular on-site inspections and third-party verification
- Ethical sourcing, Fair wages, safe working conditions, and human rights protections
- Comprehensive ESG reporting, Transparency on supply chain risks and mitigation strategies
- Modern Slavery Act compliance, Mandatory reporting and due diligence
Incorporating these principles into governance structures is not only a moral imperative but also a strategic necessity in today's global economy.
The "Good Governance Checklist" in Action
To help organisations navigate the complexities of governance and sustainability, I developed a "Good Governance Checklist" that highlights the essential components of effective oversight.
Essential Components of ESG Governance
1. Board Composition and Capability
- Board includes directors with ESG expertise
- Diversity of skills, backgrounds, and perspectives
- Regular ESG education and training for directors
- Access to independent ESG advisors
2. Strategy and Integration
- Sustainability embedded in business strategy
- Material ESG issues identified and prioritised
- Clear link between ESG and business value
- Long-term sustainability goals aligned with business objectives
3. Risk Management
- ESG risks integrated into enterprise risk register
- Climate risk assessment (TCFD, ASRS, IFRS S2)
- Supply chain due diligence and Modern Slavery compliance
- Scenario analysis and stress testing
4. Accountability and Oversight
- Clear ownership for ESG outcomes (board committee, executive)
- ESG KPIs linked to executive remuneration
- Regular board reporting on ESG progress
- Independent assurance and verification
5. Transparency and Reporting
- Public disclosure of ESG performance (GRI, TCFD, ASRS)
- Stakeholder engagement and feedback mechanisms
- Third-party certifications (SBTi, Climate Active, B Corp)
- Honest communication of challenges and progress
6. Culture and Capability
- ESG values embedded in organisational culture
- Internal capability development and training
- Employee engagement and behaviour change programs
- Two-way communication and feedback loops
7. Innovation and Continuous Improvement
- Regular review and update of ESG strategy
- Benchmarking against peers and best practice
- Investment in emerging ESG technologies and practices
- Agility to respond to changing expectations
Case Study: Nemawashi and Consensus-Building at Fujitsu
This checklist is not theoretical, it has proven effective in practice.
The Approach: Nemawashi at Fujitsu
During my tenure at Fujitsu, the team applied the Japanese cultural practice of nemawashi, or consensus-building, to gain support for embedding sustainability into board-level strategies.
What Is Nemawashi?
Nemawashi literally means "going around the roots", the practice of laying groundwork and building support before formal decision-making.
How We Applied It
- Early stakeholder engagement: Involved key decision-makers before formal proposals
- Building alignment: Created shared understanding of goals and benefits
- Addressing concerns: Proactively identified and resolved objections
- Collective ownership: Ensured all stakeholders felt invested in the outcome
The Results
By involving stakeholders early and building alignment around shared goals, we were able to implement significant changes that delivered both environmental and commercial benefits.
This is governance in action: not just top-down mandates, but collaborative, culturally appropriate approaches that build lasting commitment.
Transparency and Innovation
Transparency in ESG performance is a cornerstone of good governance.
Frameworks and Standards
Global Reporting Initiative (GRI)
- Comprehensive sustainability reporting framework
- Widely recognised globally
- Covers environmental, social, and governance topics
Science Based Targets initiative (SBTi)
- Independent validation of climate targets
- Aligned with Paris Agreement goals
- Demonstrates credible climate action
TCFD
- Climate risk and opportunity disclosure
- Governance, strategy, risk management, metrics
- Increasingly mandatory in Australia (ASRS)
Australian Sustainability Reporting Standards (ASRS)
- Mandatory climate reporting from 2025
- Based on IFRS S1 and S2
- Applies to large entities and groups
The Role of Technology
Yet governance must also evolve to address emerging challenges, such as the ethical use of artificial intelligence (AI).
As companies adopt AI to streamline ESG reporting and risk management, they must ensure that their governance frameworks address:
- Data privacy, Protection of sensitive information
- Algorithmic bias, Fairness and equity in AI decision-making
- Ethical implications, Transparency and accountability in automation
- Human oversight, Maintaining human judgment in critical decisions
What has become increasingly clear in my work is that governance is not just about mitigating risks, it's about unlocking potential.
Governance as a Commercial Advantage
A strong governance framework can drive innovation, open new markets, and strengthen relationships with stakeholders.
Real-World Impact
For instance, our ability to demonstrate measurable ESG outcomes:
- Satisfied regulatory requirements, Compliance with Modern Slavery Act, TCFD, ASRS
- Appealed to clients, ESG credentials prioritised in procurement decisions
- Secured long-term partnerships, Alignment of values proved decisive factor
- Won tenders and contracts, Competitive advantage in ESG-conscious markets
- Built stakeholder trust, Transparency and accountability strengthened reputation
The Australian Context: ASRS as Opportunity
In Australia, governance practices are increasingly shaped by local regulations, such as the Modern Slavery Act, as well as global frameworks.
More recently, the upcoming Australian Sustainability Reporting Standards (ASRS) are seen by many organisations as a compliance burden.
However, having worked with New Zealand organisations over the past two years as they implemented similar mandatory reporting legislation, I've seen how those that view these requirements as an opportunity rather than a box-ticking exercise reap significant benefits.
Benefits of Proactive ASRS Adoption
Strengthened Resilience
- Better understanding of climate risks
- Improved scenario planning
- Enhanced operational efficiency
Competitive Advantage
- Differentiation from competitors
- Stronger positioning in tenders
- Access to ESG-focused capital
Market Credibility
- Transparent reporting builds trust
- Alignment with global trends
- Leadership positioning
The ASRS offers Australian organisations an opportunity to go beyond compliance and demonstrate leadership. Companies that proactively adopt transparent reporting and robust governance practices can build stronger stakeholder trust and position themselves as leaders in an increasingly ESG-conscious marketplace.
How ESG Strategy Can Help
At ESG Strategy, we help boards and executives build governance frameworks that drive sustainability, manage risk, and create commercial advantage.
Our Services
Board Education & Governance Support
Director training, board briefing packs, scenario analysis, governance framework design, ESG committee establishment
Fractional Chief Sustainability Officer (CSO)
Senior ESG leadership on retainer ($8k–$15k/month). Board-ready outputs, strategic integration, 6–12 month engagements. Build internal capability, not dependency.
ASRS & Climate Reporting Readiness
Gap analysis, scenario development, disclosure drafting, assurance preparation, ongoing compliance support
ESGenius™ Benchmarking
AI-driven ESG maturity reports ($2,500, reviewed by Lee personally). Governance, Climate, Social, Waste & Materials scoring.
Related Resources
- ASRS Climate Reporting: What Australian Companies Can Learn from New Zealand
- Why Companies Fail at Sustainability Goals (And How to Succeed)
- ESG for Boards: Governance, Oversight, and Strategic Direction
- Fractional CSO Services: Senior ESG Leadership on Retainer
- Read the original article on Governance Institute of Australia