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Introduction
The fields of practice of environmental, social and governance (ESG) risk management and its incorporation into strategy, accounting and operational risk reporting have developed rapidly over the last decade or two. The corporate sector is addressing perceived increased interconnectivity between social, environmental and economic performance. Practitioners and scholars are grappling with increased interconnectivity between corporate reporting, risk, governance and performance and the complexity that entails. This increased complexity and unpredictability of relationships between relevant phenomena requires new theorisations in order to move towards a more multifaceted and interacting approach to social, environmental and economic sustainable development (Unerman and Chapman, 2014). Scholars have called for a review of extant theoretical insights and a development of theoretical frameworks to structure researchers’ observations of practice and to enable the communication of new understandings (Adams and Larrinaga-González, 2007; Adams and McNicholas, 2007; Contrafatto, 2014; O’Sullivan and O’Dwyer, 2015; Parker, 2005; Unerman and Chapman, 2014).
The paper examines contemporary and emerging interrelationships between: ESG risk; delivering on corporate strategy; and, corporate reporting, particularly non-financial reporting: from the perspective of board directors and insofar as they influence a company’s ability to create value for its stakeholders[1]. Creating value for stakeholders has been explicitly linked to creating value for shareholders by both framework setters and reporters[2]. Interviews were conducted with 16 directors including board directors of large listed companies on the Johannesburg Stock Exchange (JSE) and the Australian Stock Exchange (ASX). These two countries are of particular interest due to the different nature of corporate reporting, governance and external contextual factors. In particular, integrated reporting is mandated for companies listed on the JSE[3] and discouraged in Australia by regulation relating to directors’ liability (see Huggins et al., 2015).
The interviews sought to gauge: approaches to ESG risk governance; understanding of the nature of ESG risk issues and their relevance to long-term strategy; and, the role that corporate reporting has played informing their views. By nature of their position, the interviewees are amongst the most influential people in the world with respect to aligning business outcomes with outcomes for society. Board directors, also referred to as non-executive directors (NEDs), of large complex companies are generally required to have held senior management positions, often as chief executive officer (CEO), and hence have...