Sustainability or ESG Committees: how to structure your board


  • Tim Stutt, Partner and Australian lead, ESG, Herbert Smith Freehills
  • Maxine Brenner, Non-Executive Director, Woolworths Group, Origin Energy, Orica Limited, and Qantas Airways
  • Naomi Edwards, Independent Chair, Spirit Super

This session provided practical guidance for integrating climate change into decision making through appropriate governance structures. The key takeaway being that an organisation’s approach will depend on the entity, sector, size, and maturity. In practice, a Sustainability Committee may help move the dial on ‘legwork’ and support for climate and ESG. However, oversight of strategy and risk is a key board accountability, so committees are supporting structures only. 

The session explored the following topics:                                                         

  • Directors’ duties and effective stakeholder engagement on climate 
  • The role of existing committee structures in elevating climate and ESG matters 
  • Overlap between different committee responsibilities and common pressure points 
  • The function, structure, and benefits of a Sustainability Committee, including suggestions for a Sustainability/ESG board charter and composition.

In practice

  • ESG strategy – Must be owned by the full board. It should be integrated into the corporate strategy and be made a standing agenda item. The board may delegate specific climate matters to committees to do a deep dive on a particular issue. For example, detailed climate modelling and transition planning. 
  • Structures – There is no one-size-fits-all approach to addressing climate change at the board level. Regardless of approach, it will be critical to clarify what each board committee is responsible for when it comes to sustainability and climate change. For example, the Audit Committee may have responsibility for the verification of ESG related reporting and the Remuneration Committee may be tasked with considering how ESG targets can be incorporated into performance hurdles for senior executives. Companies may also use a combination of these approaches. There should also be clear guidance on referral between committees. 
  • Independent advice – Smaller organisations without the expertise, experience, or board time may benefit from independent and external advice. For example, boards should seek independent advice on setting remuneration metrics related to sustainability. 

Final thoughts

Sustainability Committees are expected to become more common as regulation and scrutiny increases and companies’ climate and ESG strategies become more sophisticated.

Ambition to Action: Key actions for boards

To govern effectively, boards must embrace climate change matters to ensure they are well positioned to meet accelerating climate risks and opportunities, as well as the increasing demand for climate action from investors and stakeholders. The increased focus requires directors to consider the appropriateness of existing governance structures.

This session summary was provided by the hosts.