Check out our previous blogs in the series detailing the "E" in ESG, which stands for “Environmental” and the "S" in ESG,  which stands for “Social.”

What Governance Means

The “G” in ESG stands for “Governance.” Governance is how a business identifies, monitors and executes potential risks and opportunities related to ethics and sustainability.

Elements of governance include:

• Board independence and oversight – Boards with diverse expertise, including sustainability backgrounds, are better equipped to evaluate ESG risks and opportunities and to hold management accountable.
• Ethics and values beyond compliance – Codes of conduct, ethics training, and whistleblower protections embed integrity into daily decisions rather than treating ESG as a box-checking exercise.
• Transparency and record-keeping – Standardized reporting and third-party audits make ESG performance credible and verifiable.
• Risk identification and mitigation – Integrating ESG into strategic planning ensures businesses proactively manage risks like climate impacts, supply chain issues, or regulatory shifts.

Governance may come last in the acronym, but it drives results.

For example, a global apparel company may pledge to cut carbon emissions and improve labor practices, but without board-level oversight and transparent reporting, suppliers could continue engaging in harmful practices – leaving the company exposed to accusations of greenwashing. With strong governance structures, however, companies can spot risks early, correct course, and make their ESG commitments stick.

Assessing Strong Governance

Under regulatory programs like the one established by California SB 261, companies will be required to explain how climate-related financial risks are managed and overseen, clarifying the role of the board and how accountability is maintained throughout the organization.

Other standards including the Sustainability Accounting Standards Board (SASB) have customized governance frameworks based on the industry. These standards include useful metrics to track and measure corporate governance relating to ESG, such as the number of ESG non-compliance incidents in a year, the amount of money lost to fraud or anti-competitive practices, and amount of revenue from countries with low anti-corruption scores from third-party verifiers. 

Structuring ESG for Effective Governance

While corporate structure is key for good governance, what that looks like can vary. Some companies like Unilever have opted to hire a CSO, or Chief Sustainability Officer, to work across departments and harmonize ESG efforts throughout the company. Others have opted to create ESG committees on their corporate boards to provide more oversight of executives charged with implementing ESG initiatives. Positions like the Chief Financial Officer also have a key role to play, often taking a lead role in ESG programs due to the increasingly important impact of ESG reporting on securities liability and investing on a global scale.

Another effective approach is to house ESG programs within legal teams. This structure can help ensure timely reporting and protection of sensitive data, while also enabling quick escalation of issues to senior leadership. Legal teams are also well positioned to oversee any audits and compliance reviews.

Regardless of the structure, the most successful ESG programs are those where communication flows freely between departments and leadership remains visibly committed.

Future of Governance?

Effective governance ensures data is relevant, accurate, securely managed. For senior leadership to make informed decisions using ESG data, it must also be easily accessible and digestible. While new tech programs like Microsoft Sustainability Manager and Workiva bring the promise of having AI synthesize and report numerous streams of ESG data, incorporating a human lens into the process is crucial to strong governance. Furthermore, the high cost and lack of transparency around how these programs work can outweigh the advertised increase in efficiency. 

Throughout this series, we’ve shown how the three pillars of ESG work together. The "E" focuses on environmental impacts. The "S" ensures fair treatment of people and workers. The "G" provides the structure that turns environmental and social commitments into credible, lasting action.

Governance may come last in the acronym, but it is central to ESG success. Companies that strengthen their governance frameworks today not only protect their reputations but also position themselves for long-term, sustainable growth.

Learn more about how BBJ Group helps companies build robust ESG governance and reporting systems by visiting our ESG Practice page.