ESG or Environmental, Social and Governance, is a growing consideration for investors and can generate value for businesses,1 including those organized by Indigenous communities in pursuit of economic development objectives. Many of these businesses are organised by Chief and Council, as the elected government (the "Government"), who are faced with the dilemma of how much control or oversight they should maintain. Hence, the first important ESG consideration is the level of participation that Government will have in the business' governance.
It is no secret that Government is affected by community politics, and it is common knowledge that running a community is busy work. Considering this with the potentially conflicting duties to the community and to the business, too much oversight or control by Government can result in governance challenges. These challenges include opportunities for political interference or capture, and delays in decision-making.
Political interference or capture occurs when the interest of the business is subjugated to outside interests. For example, a business may need to make a decision on a matter that will have long-term benefits but is opposed by the community because of the short-term impacts. In this situation, the Government may feel pressure from the community to veto the decision despite that it may be overall beneficial.
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Originally published by Industry West Magazine.
Footnote
1. Witold Henisz, Tim Killer & Robin Nuttall, "Five ways that ESG creates value", McKinsey Quarterly (November 2019).
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