How technology and digital governance support top management in ESG issues
Interview with President of Acea, Michaela Castelli, on technology, digital governance and opportunities for ESG (Environmental, Social, Governance).
ESG (Environmental, Social, and Governance) topics are on the agenda of the world’s business leaders. In this interview, we had the opportunity to discuss ESG and the role of technology in supporting digital governance with Michaela Castelli, President of the Italian Acea Group. President Castelli also shared her vision of how digital tools like Sherpany can help the board of directors and the management become more efficient.
Are Environmental, Social, and Governance (ESG) issues more frequently addressed than in the past? Why do you think awareness towards these issues is increasing?
Michaela Castelli: Yes. There is a growing attention on ESG issues by the board of directors (BoD), which are, in turn, connected to the progressive evolution of technology, and shape a new type of governance - the digital governance.
The evolution of the external context - in terms of social, regulatory, competitive, and stakeholder dynamics - increasingly steers the attitude of directors in taking a stand towards a sustainable business strategy. An approach like this benefits, without a doubt, from the advantages of technology and digital governance. Investors, too, pushed by the ongoing European regulatory developments (e.g. sexual and reproductive health and rights, action plan on sustainable finance), are introducing approaches that use environmental, social, and governance criteria to evaluate and select investments.
We can note that the evolving regulatory environment has driven a first phase of change which, subsequently, attracted greater attention and awareness, at all levels, for the entire reference framework. This led to the emergence of best practices. In this context, it's best to stress out that for a listed company, corporate governance best practices are an essential element of a better business management.
In your perspective, what are the main ESG challenges organisations face today?
Michaela Castelli: The Agenda 2030, that includes the related 17 UN Sustainable Development Goals (SDGs), is one of the main references to identify the scenario of challenges organisations face today. It is no coincidence that one of the latest policy documents drawn up by the Juncker Commission in the wake of the renewal of EU governance bodies mapped out the scenario for a transition to a sustainable Europe by 2030 in the pursuit of SDGs.
The scenario also includes specific challenges for the utility sector - among them, following goals related to:
- the access to economic, reliable, and sustainable energy systems;
- the construction of resilient infrastructures;
- the promotion of inclusive, sustainable, and innovative industrialisation;
- inclusive, resilient, and sustainable urbanisation; and climate change.
In what ways does technology support a digital governance and the BoD in managing these challenges?
Michaela Castelli: ESG issues, as it can be noted in every discussion forum, are strongly interlinked. Economic, environmental, and social dynamics are cross-related, and their impact is redistributed in their own domains. The aspects and variables behind these dynamics are now studied thanks to the use of the most advanced technologies, such as big data.
The information that runs through public service networks, such as electricity and water, is now increasingly digitised. The process of digitisation of organisations, capable of exploring the potential and benefits of digital technologies, and even digital governance, are certainly supporting factors.
"Technology and digital governance can help when they are able to summarise this information in a reliable, timely, and meaningful manner - for example by correlating it to the level of risk - and enable directors to make informed strategic decisions."
In view of your experience in several mandates (e.g. ACEA, Recordati, SEA Milano), what are your suggestions for improving and ensuring corporate compliance and transparency?
Michaela Castelli: I believe we must always remember that people remain an essential and decisive factor in guaranteeing the success of a company. From this point of view, a strategy has a much greater chance of success if it is backed by a deep-rooted corporate culture, as well as, by a sharing of values and rules common to all those who, in different forms, are called to contribute through their actions. However, these must be behaviors and values that unite all: employees, collaborators, managers, and therefore, also the corporate bodies operating within the same organisation.
That is why, it is essential that the company’s top management plays a driving role in ensuring that the values of compliance and transparency are deeply rooted in the corporate culture.
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Considering your role as a chairwoman, how is an executive and board portal useful for this specific role?
Michaela Castelli: A software dedicated to meetings of corporate bodies can certainly facilitate immediacy and security of information flows of directors. It also allows for easier accessibility, better interaction, and a guarantee of traceability of flows. That said, the company's entire digitization process welcomes and exploits the advantages of such technologies for directors to ensure an optimised digital governance. However, I still encounter some reservations towards these instruments, most of the time due to a lack of full mastery of them. From this point of view, I believe it is essential to work with solutions that reconcile security with ease of use.
The new technological solutions should further evolve to support the activities and the functioning of the board of directors. Let me explain myself with a fairly common example. Currently, board meetings are guided by an agenda filled with substantial presentations and long executive notes. This could lead to meetings where there is not sufficient space to discuss important issues. In such cases, the executive and board portal can facilitate a more agile and effective management of the work, thus allowing the board to focus on the most relevant issues.
What differences do you notice between board of directors meetings now compared to 10 years ago?
Michaela Castelli: I believe that the differences in the way the board of directors functions today are due to certain changes that have taken place in recent years. On one hand, there has been a differentiation of the areas allocated to the corporate body, as well as an increasing involvement in issues of governance and other issues that are not strictly business-related.
At the same time, also as a result of regulatory or self-regulatory interventions, we have witnessed an increasing diversity in skills and competences within the board. It comes without saying that technology had a significant contribution to this and influenced the appearance of digital governance within many organisations. The combination of these aspects has had a significant impact on the approach and the internal dialectics within the board, making it more articulated and dynamic.
In the coming years, how do you see technology and digital governance supporting top management and board of directors in pursuing ESG challenges?
Michaela Castelli: The traditional business is evolving towards digital organisations, with management and the board of directors leveraging all opportunities that come through the adoption of new technologies. This also marks the appearance of new approaches to already consolidated processes: digital governance is a good example in that sense allowing for leaders to work in different ways which are strongly connected to technology.
The most useful technology to support top management will be the one that allows them to align promptly on the company’s performance, governance, compliance with planned strategic objectives and exposure to risks: particularly in reference to ESG issues.
Technology will also be useful in providing directors with medium to long-term scenario forecasts which highlight strengths and opportunities for business sustainability.
What suggestions would you give to technology companies when developing new software solutions to support business leaders?
Michaela Castelli: I would suggest technology companies to focus on effectiveness by allowing the management to use their time in the most fruitful way.
At last, what other topics may be on the board's agenda in the upcoming years and why do you think they will become more prominent?
Michaela Castelli: It is difficult to express an opinion on which topics may become subject to examination and decision at board level. This may depend on a series of external factors such as the regulatory context, the evolution of best practices, or the particular context in which one or more companies will operate.
Personally, however, rather than seeing an increase in the amount of subjects on which the board will be called upon to express its opinion, I imagine that initiatives aimed at providing directors with adequate knowledge (on the company’s business sector, as well as its dynamics, evolution, and main risks), can be applied on an increasingly larger scale.
Appropriate use of these initiatives could enable directors at board level to play their role more effectively, consciously, and consistently. These are activities that can still evolve in many ways, and for which in the future a digital platform can prove to be a useful support for the boards of directors.