Integrating ESG into corporate governance: benefits and levers

Preparing for the CSRD, stakeholder demands, business model resilience: implementing CSR governance is now a major challenge for companies. However, many companies struggle to collect and use sustainability information in their strategic decisions. Find out why ESG should be integrated into corporate governance and what levers can be used to achieve this.

ESG and governance: why is this a strategic issue?

The non-financial reporting requirements of the CSRD directive have prompted affected companies to rethink the role of ESG in their governance. But the strategic aspect of sustainability criteria is not based solely on regulatory changes. Many stakeholders are calling for greater transparency in ESG information and concrete commitments from companies. Accordingto Tennaxia's 2025 study, 89% of the companies surveyed use ESG information to respond to requests from their customers, banks, or investors. 

More broadly, companies have a financial interest in integrating ESG into their governance. Numerous studies have long proven a positive correlation between non-financial performance and financial performance.The October 2025 study by Impact France and E&H once again confirms these findings. In its sample, companies most committed to CSR are nearly twice as likely to have achieved their revenue targets between 2022 and 2024.

This financial performance can be explained by better ESG risk management, increased innovation capacity, and a more resilient business model. Improved stakeholder relations, employer brand enhancement, and differentiation from competitors are also important factors.

What levers can be used to integrate ESG into governance?

Effectively integrating ESG into governance requires structural changes. Here are three effective levers for bringing sustainability issues to the boardroom.

1 – The implementation of high-quality internal ESG reporting

High-quality internal ESG reporting carried out at sufficient frequency is essential for integrating CSR into strategic decisions. Unsurprisingly, data collection and reliability are often the number one concern for companies preparing for CSRD. But successful internal non-financial reporting requires overcoming the same challenges.

To implement effective ESG data collection, it is advisable to:

• Identify the data to be collected based on topics that are relevant to the company and its stakeholders. The data selected must be tailored to the needs of the intended internal users.
• Conduct a gap analysis to determine what data is already available and what strategic information is missing. A company affected by the CSRD may choose to prioritize certain material topics in its internal ESG reporting.
• Choose ESG software that is suited to the company's internal and external reporting needs. The selected tool should enable collaborative data collection and automatic reliability checks. Automatic non-financial reporting features can be a plus.

The frequency of internal reporting must be adapted to strategic and operational data management. Tennaxia's 2025 study reveals that the majority of companies surveyed (36%) report ESG information to management on a quarterly basis. Other sources, such asKPMG International's 2024 global survey, confirm the adoption of this reporting frequency to guide corporate strategy on most ESG issues.

2 – Accountability of the Board of Directors and distribution of tasks among committees

For sustainability to become central to governance, ESG must become a collective responsibility of directors. Awareness-raising and training initiatives are often useful in providing the board of directors with sufficient expertise in this area. The creation of a CSR (or ESG) committee is obviously recommended to ensure overall consistency in sustainability decisions.

But other committees must also integrate ESG into their work. For example, the audit and risk committee must take into account the company's exposure to environmental, social, and governance risks. The compensation committee can play a major role by linking part of compensation to ESG indicators.

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3 – Indexing variable compensation to ESG criteria

Indexing variable compensation (short-term, long-term, profit sharing) to ESG criteria is clearly a major lever for making sustainability a genuine strategic priority. As shown in Tennaxia's 2025 study, this practice is growing, but remains largely underutilized by compensation committees.

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To implement this lever, it is essential to choose relevant, measurable ESG KPIs that are preferably reviewed annually. The topics selected can be varied. Among CAC 40 companies, a large proportion of the indicators are related to_CO2 emissions, diversity and inclusion, and health and safety (3rd edition of the CSR Criteria and Remuneration study - PwC, Orse, Global Compact Network France).

The proportion of variable remuneration allocated to ESG criteria must be sufficient to have a real impact on companies' trajectories. It is generally between 10% and 30% for short-term and long-term variable remuneration.

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Some best practices for integrating ESG into governance

Successfully integrating ESG into corporate governance is a major undertaking. Here are six best practices to adopt to facilitate this transition and avoid common pitfalls:

1. Define roles and responsibilities across ESG governance, using tools such as the RACI matrix;
2. Regularly consult with internal and external stakeholders to align everyone's ESG issues, for example, by creating a stakeholder committee.
3. Create positions for managers trained in ESG issues (e.g., Chief Sustainability Officers) and integrate them into decision-making processes.
4. Establish a systematic ESG agenda item at every board meeting;
5. Review ESG risks, internal ESG reporting criteria, and those taken into account for variable compensation on an annual basis;
6. Define and formalize ESG reporting flows, aiming for a minimum quarterly frequency for reports to the Board of Directors and management.

At the operational level, another important key to successful sustainable governance is promoting interactivity between departments. Beyond the CSR team, CFOs are playing an increasingly important role in environmental transition and ESG issues. Clearly defined roles and effective communication between different teams are therefore crucial. To address these challenges, it can be very useful to create a sustainability committee at the executive committee level, involving the heads of the relevant departments.

Conclusion

Integrating ESG into governance is a logical and necessary transition for companies. The most mature companies are more resilient to sustainability risks, as well as regulatory changes. Making governance bodies accountable for ESG issues is also a way to improve financial performance and the company's relationships with its stakeholders.

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Sources :

• “CSRD & Omnibus: where do companies stand on ESG reporting?”,^13th edition of the Tennaxia study,2025
• “CSR criteria and remuneration: strategic alignment?”,^3rd edition, CSR Observatory, PwC, Global Compact Network France, January 2024.‍
• 9th edition of the Responsible Governance Barometer, IFA, Ethics & Boards, September 2025.‍
• “Commitment to sustainability in the service of business performance,” national study, Impact France, Des Enjeux et des Hommes, October 2025.‍
• “Anchoring ESG in governance,” KPMG International, 2024.‍
• “ESG and financial performance: Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015 – 2020”, Tensie Whelan, Ulrich Atz, Tracy Van Holt and Casey Clark, CFA, 2021

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