This and many other questions are answered by Head of #UNELaw school, Professor Michael Adams, in his USQ School of Law and Justice Research Seminar: “Can corporate governance compliance promote CSR?: fish rot from the head!”
Michael notes that most people have an understanding of what good corporate governance is but we should aim higher, especially in regards to environmental, social and governance (ESG) and corporate social responsibility (CSR). He found there is confusion around ESG and CSR. They are similar but different, and boards need to understand them both. His presentation outlines the differences and similarities between these two expectations.
How should we assess good corporate governance? Why are ESG and CSR important? Who is responsible for implementing these concepts.? Michael answers these questions by using the theory he developed known as The Three Pillars of Good Corporate Governance:
- Corporate Governance – the big picture where Boards direct their companies on their business and how they will carry it out. This is where the two elements of CSR and ESG sit and start.
- Due Diligence – a mechanical process of review which is conducted by: traditional or external reviews; and, internally with a systematic approach to determine risks and how to deal with them.
- Compliance – sadly a ‘tick a box’ approach so often seen, important for record keeping but lose the purpose of what was first intended.
Boards use these terms regularly but it is essential for Boards to interpret them in a nuanced way. While the terms are intricately linked, they are three distinct elements of good corporate governance.
Michael stresses that leadership is critical in CSR – the fish rots from the head! If the board is corrupt then this flows through to the rest of the organisation. CSR is from the perspective of the corporation, and ESG is from the investor’s perspective. ESG posits that a person will not invest in a company if it is failing to take into account, for example the environment. Studies show that good corporate governance has a clear link with economic development. Michael persuasively argues that implementing the three pillars leads to best outcomes for the company and all stakeholders!
You can watch Michael’s presentation by clicking on the image: 
