Few would argue against the fact that over the last couple of years, ESG has become a real buzz-word across most industries. Yet at the same time, few would probably agree on exactly what the term encompasses at a theoretical level, and even fewer on a practical level. As the concept has gained traction, its promoters have claimed that it will play a critical role in moving the world to a more sustainable and fairer future. Leaders and boards have come to realise that investors are increasingly looking to put their money in to businesses that are accountable for their impact on people and the planet. Meanwhile, the concept’s detractors have criticised it for its very broad and often ill-defined objectives, while at the same time calling out businesses for a lack of transparency around ESG metrics and an excess of ‘greenwashing’.
Based on our reading of the current state of ESG affairs, the idea continues to be a topic of great interest to many companies, but much work remains to be done to raise ESG reality to the level of its promise.
Perhaps ESG’s relevance to, and potential impact on, so many facets of what a business does is our greatest limitation but also our greatest opportunity. From how it produces its products or services, to how it treats its employees, to how it manages its environmental footprint, to how it hires, promotes, and retains talent, ESG infuses almost anything under a corporate umbrella. That is why when we at Armstrong Craven discuss the topic with our clients, we always ask them what concrete, non-BAU steps they are taking to put ESG front and centre of the corporate agenda. Just as with talent acquisition, we believe that ideas can be laudable, but it is decisions and actions that drive any strategy forward.
One concrete step which any company should consider taking in order to better understand its current and future impact on its workforce, on the wider community, and on the wider environment, is the setting up of a shadow board. Based on recent discussions we have had with a number of companies, we believe this can and should be implemented as an ESG best practice.
Shadow boards, also known as advisory, horizon or mirror boards, are established alongside the standard board structure. They usually have the goal of augmenting strategic thinking by bringing in different perspectives; they often provide their members with the opportunity to develop their skills and build new networks. These complimentary boards can be composed of anyone whose perspective is of interest, from external experts to employees. It should be noted however, that shadow board members do not undertake tasks that would typically be expected of a Director nor do they vote at board meetings.
According to Patrick Dunne, experienced board member and Chair of the EY Foundation board, there is a spectrum of involvement possible:
The shadow board may review the same papers the board does, giving their perspective on current strategic concerns. They may be allocated broader topics based on consumer or industry trends, or be asked to focus on an operational challenge. Or they may be involved in decision-making, given an equal voice to existing board members. Whatever the format, the focus is on creating a space for new thinking to emerge. The most successful shadow boards have some common characteristics: they have a senior sponsor (often the CEO), they are well structured and they evolve over time.
One example of seeking broader perspectives is a variation on the traditional corporate advisory boards made up of Non-Executive Directors (NEDs). Typically deployed in larger and publicly listed companies seeking to change direction, these external experts protect the interests of shareholders by sharing their experiences and alternative points of view.
The FRC will be assessing whether NEDs, as opposed to having a worker on a board or using an advisory panel, is an effective way of improving company culture and building trust in business.
Interacting with the board of directors, all from very different backgrounds, helped shape my thinking. The relationship was very respectful and inclusive. They had broader experience; I had insights they wouldn’t have.
In 2016, following a structured recruitment process, Nationwide executives asked Lisa Stanton, the CEO of a US FinTech at the time, to join an advisory board of five external experts to provide input on how IT was evolving in the world of banking. For four years, the advisory board met monthly with the executive board, providing insights according to their areas of expertise, and investigating key strategic topics such as; should the building society establish as digital-only bank? For Lisa, the benefits went both ways:
Similarly, Armstrong Craven has a number of highly experienced advisers. Brian Bules joined the organisation in 2021 as a Board Advisor following his career with Goodyear and 23 years in senior HR leadership roles with GlaxoSmithKline. This additional voice contributing to our Board is aimed at strengthening our focus on changing client needs around the world, particularly in the US. In early 2022 we also asked Mel Forbes, MD of APSCo Outsource, to join us to advise on the development of our talent sourcing service that supports major global companies source niche and senior talent at scale.
Undoubtedly, senior external advisors have a wealth of different experiences to share, but if they are focussed on growth and commercial success, can they truly offer fresh ESG perspectives?
There is not much currently documented about shadow boards. The most common iteration seems to be a group of younger employees, providing different perspectives.
There is a need to understand the dynamics and perspectives of younger generations in order to protect the future of existing businesses
The impetus behind shadow youth boards often includes seeking out new perspectives and ideas, talent development, and creating a more inclusive culture. For Marco Bizzarri, CEO of Gucci, their shadow board of employees under 30 is one of the avenues he has opened to encourage creativity and cultural change. And it seems to be working - as of 2020, Gucci was the fourth most valuable luxury brand worldwide.
We’ve looked into a couple of different organisations who have chosen to form shadow youth boards and who continue to develop them as example use cases.
KPMG are a multinational professional services organisation. Working with businesses ranging from small start-ups and individuals to major multinationals, across all industries. Their mission is to support the UK in a connected world.
The NGC consists of 30 people from KPMG’s Global Board firms; each individual serves a 12-month term. Its members are a diverse mix of people under 35. Each NGC member is asked to create a peer group in their own countries or territories of 10-20 colleagues to bounce ideas off so that they can amplify the voices of their peers.
Why was it created?
The NGC was set up as a safe space for people to learn, apply themselves to key strategic issues, identify solutions and contribute to improving KPMG’s strategic outcomes. Given that a significant proportion of KPMG people are under 35, it was important to amplify their contribution to the firm’s strategy. The NGC gives visibility to younger employees, and helps ensure KPMG’s global leadership has access to diversity of thought and invites challenge.
What do they do?
To support global leaders, the NGC focuses on strategic topics such as ESG, talent attraction and retention, growth, client and people experience, external impact and the future of work. They have networking calls with global leaders to talk about the topic, divide up into smaller groups, and three months later present back to the KPMG Global Board and management team.
How has it developed?
KPMG created a Millennial Board in 2018. In 2020 they refreshed it, putting in more structure, and creating the Next Generation Council. Future considerations include more in-person interaction, and giving NGC members the opportunity to go beyond providing recommendations to get more involved in the implementation of their ideas.
How is it managed?
Sponsorship from the Global Chair and CEO together with the Global Board. The NGC is currently managed by the Global Head of People together with the Global Management Team. There is a strong dedicated project team comprising of future leaders who ensure the smooth running of the program. This structure and governance model has been key in helping maintain momentum and focus.
EY Foundation was set up in 2014 by EY, to align with their social impact aims. Operating as an independent charity, their mission is to transform the futures of young people who most need support to succeed in the workplace.
The YAB consists of 14 young people aged 16 – 25, very diverse in terms of gender, location, ethnicity, religion. Some are at school, some in employment, some at university. Each individual serves a two-year term. The young people apply and go through a formal recruitment/ onboarding process.
Why was it created?
An integral part of the EY Foundation from the start, the purpose of the YAB is to guide the Foundation in decision-making. It allows the EY Foundation to sense-check decisions, pick up trends to inform judgement, and gather intelligence rather than assume what is needed by the young people they aim to help.
What do they do?
YAB meets two weeks before the quarterly EY Foundation Board meeting and are given the same papers. Their review then feeds into the EY Foundation Board discussions. To facilitate even more direct involvement in decision-making, two of the YAB become trustees on the main EY Foundation Board.
How has it developed?
Youth Council set up early on but was revamped in 2019 to become the Youth Advisory Board (YAB), which has had much more impact. Clear channels of communication, very structured.
How is it managed?
Sponsored by the Chair, the YAB is currently managed by the Foundation’s Governance and Assurance Officer, the CEO and COO and their Executive Assistant, and the Chair of the Board. There are plans for a designated role to support the YAB in future.
There are many ways of bringing new perspectives into the boardroom - Armstrong Craven undertakes hundreds of talent intelligence projects gathering external insight to do just that, with the aim of providing data for more informed decision-making. Creating a shadow board is a significantly bigger commitment; they allow for the evolution of a symbiotic knowledge-sharing relationship between senior decision-makers and broader talent cohorts.
In order to have lasting impact, it is clear from our conversations that shadow boards should ideally be involved in addressing rather than just advising on strategic challenges. Critical to this is a commitment from the existing board to actively listen, be prepared for their assumptions to be challenged and respond to new ideas in a positive and authentic way. Shadow board members are likely to be less well versed in boardroom interactions and will benefit from training and development.
Shadow boards can be one component of a strong DE&I and broader ESG agenda. Rather than trying to shoehorn less experienced board members into one available vacancy on what are often very traditional board structures, a shadow board can provide a safe space for ideas to be generated and the time to formulate fresh responses to issues, as well as providing skills development and visibility for the shadow board members.
In this competitive job market, talent looks to organisations who openly demonstrate progressive thinking and have strong governance in place. This is now an optimum time to try something new; with the right intentions and appropriate investment, creating a shadow board can allow organisations to tap into new perspectives to help navigate the unknowns ahead.
We can’t assume we know everything—no matter how experienced we are. Differing perspectives and working together is what makes good teams, great. The NGC drives continuous learning, ensuring that senior leaders are attuned to different perspectives- which leads to better strategic outcomes.
The choices companies make today are very likely to impact their ability to hire and retain the best talent for years to come. At Armstrong Craven we take a consultative approach to uncover the root cause of people challenges, helping you to move from firefighting to strategic talent planning. If you are interested in finding out more about our talent insight and pipelining services, you can contact nina using the form below.
We’d like to thank the following for their contribution to the thinking behind this article:
Patrick Dunne, Chair of EY Foundation and author of “Boards”
Grace Brown, Governance & Assurance Officer EY Foundation
Lisa Stanton, Board of Directors at the Washington Trust Company,
Margje Knaapen, Global Talent Attraction & Retention Lead KPMG
Nhlamu Dlomu, Global Head of People, KPMG International
Jacqui Gale, CCO Portmeirion Group
Diane Jacobs, Principal from The Talent Advisors
Jane Stuchbury, Executive Director from Board Partners.