Focusing on sustainability to strengthen corporate governance

Abstract

This paper provides a summary of current sustainability issues and trends, primarily from an application perspective, which contributes to the state of the art of scholarly literature with implications for improved corporate governance. A leading sustainability advocate for better corporate governance is Larry Fink, who is the CEO of BlackRock, the world’s largest asset-management company with $6.3 trillion under management and offices in 30 countries and clients in over 100 countries. In January 2018, he sent a letter to all CEOs of public companies across the world to start accounting for the societal impact of their companies and to focus upon economic growth that is sustainable. Currently, a majority of S&P 500 companies have publicly disclosed their sustainability performances with Environmental, Social, and Governance (ESG) metrics. These ESG reporting companies had higher financial returns than their non-ESG reporting competitors. As gatekeepers for investors and other stakeholders, Boards of Directors should pay attention to these sustainability trends, related company performances, and opportunities for future company performance which should strengthen corporate governance.