This article summarizes a presentation at IBA’s Fall 2022 Forum on Accounting and Finance Analytics: Perspectives on ESG Reporting given by Harry M. Kraemer, a Clinical Professor of Management & Organizations at Northwestern’s Kellogg School of Management and a Executive Partner at Madison Dearborn.
As the world continues to evolve, businesses are realizing that they need to incorporate ESG considerations into their operations. This trend is causing boards of directors to adapt their strategies and consider the impact of ESG on their organizations. Harry Kraemer, a board member for nearly twenty organizations, shared his insights on ESG with students, faculty, and IBA members at a Forum on Accounting and Finance.
Kraemer emphasized that ESG is not a passing trend but is becoming increasingly important for companies to consider. He believes that ESG is shaping better business practices as companies become more aware of their environmental footprint, social impact, and governance obligations. Kraemer also pointed out that boards of directors are shifting their focus from shareholder value to stakeholder value, considering anyone who is impacted by the company’s resources, products, or actions.
“Shareholder value is important, but it should not be the only consideration,” Kraemer noted. “Companies should also focus on their social and environmental responsibilities to maximize the value they provide to stakeholders.”
So, how are boards of directors taking initiative towards upholding their ESG responsibilities? Boards are providing proper governance and addressing social and environmental concerns. They are tailoring their ESG strategy to align with the company’s other goals, creating sustainable business practices. Boards are also working towards increasing diversity within their members and measuring their environmental footprint.
However, Kraemer believes that accountability is required to address environmental concerns because it holds the most risk and costs, but also the most opportunities for companies in the long run.
When asked how much emphasis should be placed on ESG, Kraemer believes that the best answer is somewhere in the middle, rather than polarized opposite ends of the spectrum. Companies should find a balance between shareholder value and social and environmental responsibilities.
Kraemer also acknowledged that the younger generation is contributing to societal returns beyond financial returns. He urged students to be strategic in positioning themselves for future careers, and to consider opportunities in accounting, finance, and ESG reporting.
“To generate a great return, you need great people. Without them, you cannot succeed,” Kraemer explained. “Your generation demands that a company be socially responsible; that we think about the environment and social issues.”
Kraemer’s insights emphasize the importance of ESG for boards of directors. Companies must align their strategies with the environmental and social responsibilities that come with their operations. Boards of directors must provide proper governance and address ESG concerns to maximize their value to stakeholders. As the younger generation emphasizes the importance of social responsibility, companies must find a balance between shareholder value and social and environmental responsibilities to create a sustainable future.
Leave a Reply