NIGERIA Trends and Developments Contributed by: Yeye Nwidaa, Mariam Olayinka Akinyemi, Toluwalase Oliver-Jude and Adedoyin Odekilekun, Jackson, Etti & Edu
and other stakeholders are placing greater emphasis on sustainability, ethical business practices and social responsibility. Compa - nies that fail to address these expectations risk reputational damage and loss of trust, as well as investment. • Regulatory pressures/framework ‒ one of the key drivers of improved ESG in corporate governance is the regulatory framework, which regulators are steadily evolving to address ESG issues. This framework man - dates companies to provide greater trans - parency concerning their environmental and social performance. Non-compliance with these regulations may attract sanctions from the regulator. • Financial materiality ‒ growing evidence sug - gests that ESG factors can materially impact financial performance and risk management. Investors are increasingly factoring ESG criteria into their investment decisions, driving demand for ESG-aligned companies. • Long-term value creation ‒ incorporating ESG considerations into governance frameworks is seen as being essential for long-term value creation and resilience. Companies that effectively manage ESG risks and opportuni - ties are better positioned to adapt to evolving market dynamics and stakeholder expecta - tions. Challenges and opportunities The implementation of ESG principles in cor - porate governance has its unique challenges, especially in Nigeria. The following list discusses these challenges and opportunities in the inter - section of ESG with corporate governance. • Data availability and quality ‒ in this part of the world (where data collection, availability and quality are already challenging), obtaining reliable ESG data can be difficult, particularly
for non-financial metrics. Companies may struggle to collect, standardise and disclose relevant data consistently and comparably. Therefore, it becomes a challenge to measure the progress of an organisation’s ESG compli - ance. • Stakeholder engagement ‒ communication is a critical vehicle in corporate governance, and the NCCG expects companies to maintain a communication policy. Effective stakeholder engagement is crucial for identifying material ESG issues, setting priorities and implement - ing strategies. Companies must establish robust mechanisms for dialogue and collabo - ration with stakeholders. • Board oversight and expertise ‒ it is acknowl - edged that ESG is an evolving philosophy in Nigeria, requiring ongoing training and awareness efforts to achieve a commendable level of proficiency among board members. Although boards hold a crucial responsibil - ity in supervising ESG integration endeav - ours, there is often a shortage of expertise in sustainability-related domains. Therefore, enhancing both board diversity and compe - tence becomes imperative for ensuring effec - tive ESG governance. • Integration into decision-making ‒ embed - ding ESG considerations into core business processes and decision-making frameworks requires a cultural shift within organisations. Companies must align incentives, metrics and performance targets to promote ESG integra - tion. • Prospects of enhanced risk management ‒ ESG data is essential for assisting busi - nesses in engaging in effective risk manage - ment because it enables them to plan for compliance, enhance voluntary disclosures and develop risk mitigation roadmaps to handle threats in advance. By identifying and addressing ESG risks, companies can
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