NIGERIA Trends and Developments Contributed by: Yeye Nwidaa, Mariam Olayinka Akinyemi, Toluwalase Oliver-Jude and Adedoyin Odekilekun, Jackson, Etti & Edu
What is corporate governance? Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate govern - ance essentially involves balancing the interests of a company’s stakeholders, which can include shareholders, senior management, customers, suppliers, lenders, the government and the com - munity. As such, corporate governance encom - passes practically every sphere of management, from action plans and internal controls to perfor - mance measurement and corporate disclosure. Corporate governance serves as the foundation for effective decision-making, risk management and accountability within organisations. Tradi - tionally, governance frameworks focused pri - marily on financial performance and compliance with regulatory requirements. The Nigeria Code of Corporate governance (NCCG) 2018 incor - porates corporate governance in corporations by recommending and mandating an annual Corporate Governance Evaluation Report filing (Principle 15 of the NCCG). However, in recent years, there has been a par - adigm shift towards a more holistic approach that considers the broader impact of corporate activities on stakeholders and society at large. This shift has been driven by various factors, including increasing stakeholder expectations, regulatory pressures and the recognition of the interconnectedness between business success and ESG factors. Evolution of ESG in corporate governance In Nigeria, ESG has transformed from a mere buzzword for corporates into the adoption of core principles and practices. In other words, the integration of ESG principles into corporate gov - ernance practices has been a gradual but signifi - cant process. Initially, ESG considerations were
Integrating ESG into Corporate Governance in Nigeria Environmental, social and governance (ESG) reporting refers to how companies score on these responsibility metrics and standards for potential investments. Environmental criteria gauge how a company safeguards the environ - ment; social criteria examine how it manages relationships with employees, suppliers, custom - ers and communities; and governance measures a company’s leadership, executive pay, audits, internal controls and shareholder rights. Historically, ESG became a household name in the corporate governance space after its first mainstream appearance in a UN-commissioned report titled “Who Cares Wins” . Throughout the years, this report has evolved to be integral in the corporate governance practice of corporations, especially public companies. It is now important for companies to position themselves to attract the right investors by incorporating and main - taining high compliance with the principles of ESG. This article focuses on governance, and lays more emphasis on the evolving landscape of corporate governance, with a specific spot - light on the integration of ESG principles. Dur - ing the past decade, there has been a notable shift in corporate governance practices towards incorporating ESG considerations. This article provides insight into the reasons behind such a shift, the challenges and opportunities it pre - sents, and the potential impact on corporate behaviour and performance. It highlights the growing importance of ESG in shaping corpo - rate governance frameworks and offers insights into best practices for organisations seeking to adopt and effectively implement ESG principles.
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