Beyond compliance: Making sustainability strategic in the boardroom

Summary

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Podcast Summary: The Corporate Director Podcast

Episode: "Beyond Compliance: Making Sustainability Strategic in the Boardroom"
Release Date: November 12, 2025
Host: Dottie Schindlinger (Diligent Institute)
Guest: Tracy Lee Brown (Director, PwC’s Governance Insights Center)
Co-host: Megan Day (Strategy Leader, Diligent)

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Overview

This episode explores the evolving role of sustainability and ESG (Environmental, Social, and Governance) in corporate governance. The conversation highlights recent developments, including how organizations are navigating political backlash, shifting regulatory landscapes, and the imperative to make sustainability truly strategic—moving it beyond a simple compliance exercise. Special guest Tracy Lee Brown discusses the latest updates to PwC’s ESG Corporate Director’s Guide, offering actionable insights for boards seeking to integrate sustainability into their core decision-making processes.

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Key Discussion Points & Insights

1. ESG’s Evolving Role and Recent Boardroom Developments

(00:50–03:37)

• Megan Day shares a striking example: Costco tying executive bonuses to measurable social metrics in 2026, bucking the trend in the U.S. of quietly retreating from ESG—a testament to its ongoing relevance despite controversy.
• Dottie notes that these initiatives are often a continuation of earlier commitments, even if no longer publicized. Companies stick with ESG integration because it’s “core to their mission and to their values.”
• Companies are quietly persisting in their commitments, albeit with less fanfare due to current political headwinds.

Notable Quote:

“It is definitely a sign that ESG is not fully dead. Maybe it's still on life support somewhere…”
—Megan Day (01:17)

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2. From Compliance to Strategic Integration

(05:13–11:55)

• Tracy provides background on her work at PwC, emphasizing close engagement with boardrooms.
• The initial goal of the PwC ESG Director’s Guide (2020) was ESG education for directors—covering the why, how, and what.
• Recent updates reflect a more complex political and regulatory environment, emphasizing strategy over mere reporting or compliance.
• Companies should not view ESG only as a “check the box” compliance exercise, but as a forward-looking, value-creating discipline.

Notable Quote:

“Companies that approach sustainability primarily through that compliance lens often end up with this rear view perspective... But to truly unlock the value of sustainability, organizations need to be forward looking.”
—Tracy Lee Brown (09:55)

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3. Investor and Stakeholder Expectations Amid ‘Political Noise’

(07:40–09:20)

• Despite vocal critics of ESG, many mainstream investors still demand high-quality ESG data linked to business strategy.
• Some companies are reducing public ESG reporting, but almost all remain active behind the scenes.
• The landscape is segmented: Some investment communities want a strong financial tie to ESG; others remain skeptical.

Notable Quote:

“The answer isn’t necessarily to retreat, but really lean into the opportunity to show how ESG issues are about doing good business.”
—Tracy Lee Brown (08:02)

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4. Materiality and Board Focus: Moving from Broad to Targeted

(12:01–13:46)

• “ESG” covers many topics, but boards should help management identify the 3–5 material ESG topics that most impact their business.
• Prioritization should consider financial, reputational, and external volatility dimensions.
• These priorities must align with company purpose and long-term value creation, and be reassessed regularly.

Notable Quote:

“Boards can help management with identifying…three to five topics that will impact the company…not all are material…once we've identified those, making sure it’s tied back to company’s purpose and long-term value…”
—Tracy Lee Brown (12:19)

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5. Leveraging Regulatory Pauses for Stakeholder Engagement

(13:46–15:29)

• Companies should use "breathing room" from regulatory delays to actively engage investors, employees, and customers about which disclosures matter most.
• Internal alignment is vital: now is the time to establish a cross-functional ESG steering committee to create a consistent narrative and operational roadmap.

Actionable Advice:

“Use this pause to engage with your top stakeholders...and use this time to stand up a cross-functional ESG steering team which incorporates finance, legal, ops, comms…”
—Tracy Lee Brown (14:10)

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6. Board Oversight: From Awareness to Integration

(15:29–16:40)

• Tracy’s three checkpoints for boards:
  1. Integration: Is sustainability factored into all key decisions (e.g., CapEx, M&A)?
  2. Accountability: Are ESG oversight roles clear at both board and management levels?
  3. Momentum: Is there evidence (e.g., cost of capital, resilience metrics) showing progress?
• The “stretch item”: “Dashboard parity”—sustainability KPIs should sit alongside traditional financial KPIs in board reviews.

Notable Quote:

“Are sustainability KPIs right next to your financial KPIs? Is it getting the same type of board review and attention?”
—Tracy Lee Brown (16:40)

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7. Looking Ahead: The Future of the Boardroom

(17:38–19:08)

• In ten years, board composition will reflect more diversity of experience, particularly in technology, sustainability, and human capital.
• Insights from the startup/VC world reveal how varied ownership structures can affect governance.
• On a personal note, Tracy shares her passion as a parent—supporting boys and young men in finding purpose and belonging.

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Memorable Moments & Quotes

• Megan Day, on the rise and rebranding of ESG:

  “We're going through a bit of another rebranding, if you will. For organizations that really want to address these risks...that really hasn't gone anywhere and probably won't ever go.” (04:32)

• Dottie Schindlinger, on long-term value:

  “It's about how do you explain to potential investors and shareholders what you’re actually doing as a company, what is your strategy, and how does this tie into creating long-term value?” (20:57)

• Tracy Lee Brown, on governance priorities:

  “Boards will need more diverse experiences and skill sets in my view, particularly in the area of technology…I think sustainability as well, human capital, just to stay ahead…” (17:55)

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Timestamps for Important Segments

• Costco’s ESG Compensation News: 00:50–03:37
• ESG Guide History & Updates: 05:26–07:40
• Political & Regulatory Landscape: 07:40–09:20
• Compliance vs. Strategy: 09:55–11:55
• Prioritization & Board Focus: 12:19–13:46
• Stakeholder Engagement Advice: 14:10–15:29
• Board Oversight Checklist: 15:44–16:40
• The Future Boardroom: 17:55–18:26

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Conclusion

This episode underscores that while ESG faces political and public relations challenges, sustainability remains a strategic priority for boards dedicated to long-term value. Tracy Lee Brown’s practical framework for prioritization, integration, and oversight offers a roadmap for directors who aspire to move beyond compliance and make sustainability a true competitive advantage. The future—according to both hosts and guest—demands boardrooms equipped with diverse skills, continuous learning, and a proactive, strategic approach to governance.

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Further Resources:

• PwC Governance Insights Center (Find the full ESG Director’s Guide)

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(Summary prepared to reflect the conversational style and expertise of the episode, prioritizing clarity and practical takeaways for board directors and governance professionals.)

Transcript

[Tracy Lee Brown]

Foreign.

[Podcast Narrator]

Welcome to the Corporate Director Podcast where we discuss the experiences and ideas behind what's working in corporate board governance in our digital tech fueled world. Here you'll discover new insights from corporate leaders and governance researchers with compelling stories about corporate governance strategy, board culture, risk management, digital transformation and more.

[Dottie Schindlinger]

Hi everybody and welcome back to the Corporate Director Podcast, the voice of modern governance. My name is Dottie Schindlinger, Executive director of the Diligent Institute and I'm joined once again by my co host extraordinaire Megan Day, strategy leader here at Diligent. Megan, how are you doing today?

[Megan Day]

Hey Dottie, I am great and thinking of you because I've been nerding out, or maybe should I say governance geeking out over some board decisions lately. One I wanted to highlight to you is that Costco just made a move that I feel like is a bit of a plot twist here in the 2025 ESG saga. They're actually tying exec bonuses to social metrics in 2026 in this political climate.

[Dottie Schindlinger]

Unbelievable. Yeah, I saw that, Megan. I mean it is definitely a sign that ESG is not fully dead. Maybe it's still on life support somewhere, but yeah. Why don't you tell us a little bit about what Costco is up to?

[Megan Day]

Yeah, they're really trying to tie a meaningful portion of leadership comp to some ESG metrics. And you know, it's at a time, as you mentioned, that companies are sort of backing quietly away. It's a bit of a lightning rod issue here in the US but their plan is, I think, bold and specific. So in 2026 I want to tie up to 160k of the CEO bonus and 64,000 for each other executive to quantifiable environmental and social goals that include things around dei, emissions reductions, human capital management, and it's a mix of hard metrics as well as sort of discretionary evaluations. You know, it's interesting, they have really, as an organization Costco mentioned maintain this. This is not actually dissimilar from things that they have done in the past despite, you know, political pressure or controversy here in the United States. And it's really interesting to see.

[Dottie Schindlinger]

Well, you know, one of the things that that speaks to Megan is, you know, I remember back in 2022 they had a some shareholder engagement around ESG. And at that time there was a proposal that they put forth to set some science based targets for greenhouse gas emissions across their entire value chain and, and that passed in 2022. So I think this is really Just a continuation of the work that they've been doing now for a number of years. And actually, you know, that's probably a pretty good segue to the conversation that I got to have with Tracy Lee Brown from PwC. She works on ESG. And our conversation was really about what are companies actually up to these days? And the truth is, a lot. They're doing a lot. A lot of companies have continued on with commitments they made in years past because it's part of their strategy. It's. It's good for their business. It's something that's core to their mission and to their values. And so they haven't backed away from it. Maybe they're just not sending out as many press releases about it, but they're still doing a lot of the things that they had planned to do back in 2020, 2021, 2022. They're just continuing forward with some of the things that they had planned to do. I find that very reassuring.

[Tracy Lee Brown]

Right.

[Dottie Schindlinger]

Because it, you know, in some ways, it's almost a good thing sometimes to have this backlash because it forces companies to really think about, why were we doing this in the first place? Were we doing this as some sort of virtue signaling or greenwashing? Or was this truly part of our corporate strategy and truly good for our business? And it forces them to really focus on the things that matter. And so maybe in some small way, the outcome will be a net positive one, even if there's a lot of political and very public headwinds against saying what you're doing. I don't know. But what are your thoughts?

[Megan Day]

Yeah, it's interesting, Dottie. One of the things that we had talked about, I mean, I think even when the term ESG was on the rise a couple of years ago, was that. What are you talking about? Are we talking about environmental sustainability? Are we talking about corporate responsibility? Haven't companies been doing this for a long time? And I think that's still going to be the case.

[Dottie Schindlinger]

You know, we're going through a.

[Megan Day]

A bit of another rebranding, if you will. And for organizations that really want to address these, these risks that ESG was originally meant to address. Climate, equity, resilience, you know, that really hasn't gone anywhere and probably won't ever go anyway.

[Dottie Schindlinger]

Well, Megan, that's a good segue. Let's listen to the conversation I had with Tracy Lee Brown, and we can come back at the end and sort of wrap up. Joining us on the Corporate Director podcast today is Tracy Lee Brown, director at PwC's Governance Insights Center. Tracy, welcome to the show, and thanks for being here.

[Tracy Lee Brown]

Thank you, Dottie. It's so great to be with you again.

[Dottie Schindlinger]

Well, you're a returning champion, but for those who don't recall you from our last interview, do you mind sharing a little bit about what you do at PwC, a little bit about your background?

[Tracy Lee Brown]

Yeah, sure. Of course. I'm happy to. Maybe I'll just start off with. Just for those listening and not familiar with PwC's Governance Insight center, we are focused on corporate director education. We do this through issuing thought leadership. We convene directors, but we also spend a lot of our time in boardrooms with board members. So in board meetings, in committee meetings. We are very small group within PwC, and we each bring our own areas of expertise. I specifically spend a lot of my time with audit committees, but I'd say for the last six years or so, I've been immersed in the world of ESG and sustainability, so that's kind of where I focus my time.

[Dottie Schindlinger]

Well, and that's been a really interesting topic to be part of in the last year.

[Megan Day]

So let's.

[Dottie Schindlinger]

Let's just start out. I think the main reason we wanted to have you back on the show was that you've recently published the latest ESG Corporate Director's Guide. Can you tell us a little bit about the original guide and what you included in the update?

[Tracy Lee Brown]

Yeah, sure. So, Dati, I think this is actually my third podcast with you discussing the guide, actually.

[Dottie Schindlinger]

Yes.

[Tracy Lee Brown]

And just to maybe go back, as you mentioned, we first launched our Guide back in 2020, and that was more just about the education of ESG for directors. And it really tackled the why, the how, and the what to oversee for directors. And then we've made, like, subsequent updates, but it was very foundational, I'd say. One of the major updates that we made was around the time that the SEC proposed the climate rules, and we also saw mandatory reporting coming from different directions as well. And so that was a big update, and I think we actually had a podcast on that as well. And then our most recent update is basically just reflecting the current environment and not only from a reporting perspective, but also just from a political landscape as well. And so just really wanted to frame how companies should be thinking about ESG and sustainability today.

[Dottie Schindlinger]

Well, that's a really good segue, Tracy, because, I mean, you're right, there's been a lot of what I would kind of call political noise related to issues of sustainability, and particularly just even the use of the term esg. So what are some of the things that you're seeing here? Has the noise actually changed stakeholder expectations or investor expectations? I mean, what's really happening in this space?

[Tracy Lee Brown]

Yeah, so the market is definitely segmented. And maybe I'll start with the investor side. We are still seeing some mainstream investors that still want high quality data and still want to see ESG linked into to company strategies. We also see other types of investors that kind of want to see that financial connection. So think that ESG is so important, but we want to make sure there's a financial tie. And then there are also the vocal critics out there as well. And then just from a company perspective, we've definitely seen some deviations here as well, especially as we think about reporting and some of it may being paused a little bit. So we've seen some companies retreat in terms of reporting there, but I've been spending time with chief sustainability officers and also just understanding and even from their perspective, they are still moving forward with plans and the integration into these strategies because they feel that this is good business and it makes business sense for them. And so I would say that the answer isn't necessarily to retreat, but really lean into the opportunity to show how ESG issues are about doing good business. So, yeah.

[Dottie Schindlinger]

So Tracy, one of the things I want to talk to you about, I mean, this is a really evolving landscape, right? And one of the things that always sort of troubled me was whether or not companies are doing this work merely as a compliance exercise, right? Are they just looking at what the SEC is requiring them to do or what the EU is requiring them to do, or what California is requiring requiring them to do? I mean, what are some of the things that, that you're seeing around that? I mean, do you agree, is it really a compliance exercise? And what happens if a company takes that approach? I mean, what are they missing if they just stick to being compliant?

[Tracy Lee Brown]

So there are several shifts that we've seen across various elements of esg and particularly on the reporting side. Companies that approach sustainability primarily through that compliance lens often end up with this rear view perspective and focusing kind of on what's already happened. But to truly unlock the value of sustainability, organizations need to be forward looking, right. And so identifying those opportunities and risks. And I'd say that's one of the main things that we try to reframe in our guidebook as well. But at the same time, I will say that I believe that the data and reporting is as what they are disclosing. I think that plays a critical role in kind of bringing a discipline and a common language across operations and your investor relations and your boardroom. So I'd kind of look at the reporting and compliance exercise from that and that it does bring that lens as well. But definitely it should not be just a check the box exercise and making sure that it's integrated into the strategy. As I've mentioned before, are there particular.

[Dottie Schindlinger]

Ways, Tracy, that you feel like this year's version of this report really tried to address the changing landscape that maybe was new from previous iterations of the report?

[Tracy Lee Brown]

Yeah, I think we really honed in. I mean, it's always been a discussion around strategy. Right. And being integrated into strategy. And I think we really tried to say let's put the compliance aside. And again, what does this look like just from a business perspective and what are those risks and opportunities? Because those are still board responsibilities. Right. And so making sure that that is integrated into your ERM, frameworks and those type of things and it's discussion as well. So I think that was kind of the importance just given where we are from, how the landscape has shifted.

[Dottie Schindlinger]

That's really helpful. I mean, one of the other things that I think we should talk about is unpacking the word sustainability.

[Megan Day]

Right.

[Dottie Schindlinger]

That's a massive term that encompasses so many different avenues. How can boards support the management team to focus on the few things that really move the needle for their business? And I'm sure this is very dependent on sector and industry, but how can boards really make sure they're focusing on the right things when it comes to sustainability?

[Tracy Lee Brown]

Sure, and that's a great question, because when the way we think about it is esg are all those various topics that you see under that umbrella. But sustainability is basically managing those topics. Right. And integrating it into, into the company strategy. And so I would say that boards can help management with identifying what are those three to five topics that will impact the company? Because we have all those various topics under the ESG umbrella, but not all of them are material to the company. Right. And so really honing in on what are those three to five items that will impact the company? And you can start with like a wide aperture and then you can kind of break it down by looking at what is the financial impact, what is the reputational leverage, what is the external volatility for these items? And that can help cut down the list to these are the three to five items that, that we need to be focused on. The other thing that I'll just say around, once we've identified those three to five Items is making sure that it's tied back to the company's purpose and long term value as well. And then the last thing to just note here is that those three to five items are not static. Right. It's dynamic, it's constantly moving. And so it's making sure that it's being monitored and refreshed regularly as well.

[Dottie Schindlinger]

So I think you're right to point out it really all comes down to how does this create value for the company and how do you message that appropriately to stakeholders? So I want to talk a little bit more about that because you know, there's some regulatory deadlines that have shifted a bit. Right. So how might you advise companies to kind of use this new breathing room that they have to change how they're interacting with their stakeholders on these issues?

[Tracy Lee Brown]

Sure. So there are two things that I'll offer up. The first is, as you mentioned, with the stakeholders, maybe use this pause to engage with your top stakeholders and understand. So your top investors, you want to maybe speak to your employees, your key customers and understand from them where they are in terms of the disclosures that they want from you. What exactly is it that they are focusing on? Are your current disclosures meeting their requirements? And so using the steps time to basically have the dialogue with those stakeholders and so that you can provide the necessary disclosures. And then the other item that I'll say is unrelated to reporting. But what management teams could also use this time to stand up a cross functional ESG steering team which incorporates finance, legal ops, comms, et cetera, to make sure that everybody's on the same page and everybody has the same narrative. And this is not something that you can stand up in a day or two. Right. This is going to take time. And so while we have this little bit of breathing room, maybe that's something that companies could be focused on to stand up this ESG steering committee.

[Dottie Schindlinger]

Okay, so once you have everybody on the same page with respect to the strategy, then what do you tell the board? I mean, I'm curious to know how you sort of define what quote unquote good sustainability oversight looks like and how should the board be measuring progress in that area?

[Tracy Lee Brown]

Yeah, so I have three checkpoints and maybe one, one stretch item. So let me start off with the checkpoints for the board. So the first is to ask, is sustainability integrated into our decisions? And when we think about major capex expenses M and A activity, is sustainability part of the considerations when we're deciding on where to invest and what to invest in and how to spend Our money. So, so that's one checkpoint. The other one is just around clear accountability at both the board level and the management level. We've seen charters being updated, et cetera, but it's making sure that you know exactly which element of ESG who's overseeing at the board level and then also from management who is responsible. The third item or the third checkpoint is more around this evidence of momentum.

[Dottie Schindlinger]

Right.

[Tracy Lee Brown]

Are we seeing cost of capital advantages? Are there? What are we seeing in terms of our resilience metrics? Are they improving? And so I think that's another checkpoint as it relates to the stretch item. This is what we call dashboard parity. Are sustainability KPIs right next to your financial KPIs? Is it getting the same type of board review and an attention as your financial KPIs? And so I'd say that's kind of a stretch item. And so that's another thing for boards to think about there as well. Great.

[Dottie Schindlinger]

Well, Tracy, before we shift gears, where's the best place for people to find the full guide?

[Tracy Lee Brown]

Sure. So it's on PwC's Governance Insight Center. We have a host of thought leadership on our website, but if you search for the ESG or sustainability topic, you'll be able to find the guide right there.

[Dottie Schindlinger]

Great. Well, the last three questions I'm going to ask you, I think should be familiar to you since you've been a guest on the podcast before. But these are three questions we like to ask every guest who joins us on the show. So the first question is, what do you think will be the biggest difference between boardrooms today and 10 years from now?

[Tracy Lee Brown]

Ooh, in 10 years, I think the biggest difference will be the type of directors sitting around the table. Boards will need more diverse experiences and skill sets in my view, particularly in the area of technology, I think sustainability as well, human capital, just to stay ahead of what this increasingly complex and fast changing landscape. So, so yeah, I'd say that's the type of director.

[Dottie Schindlinger]

And next, what was the last thing that you read, watched or listened to that made you think about governance in a new light?

[Tracy Lee Brown]

So I, and I don't think I've mentioned this to you, Dottie, but I recently relocated from the east coast to the west coast, so I am now on the West Coast. And through that I've been listening to several podcasts as I'm trying to learn more around the startup and VC ecosystem. And it's just given me a different perspective on how ownership structures can shape governance practices. So I'd say that's kind of been the most recent aha moment for me.

[Dottie Schindlinger]

And finally, Tracy, what is your current passion project?

[Tracy Lee Brown]

So, Dottie, if you look at my LinkedIn, you will see that I lead with the title of mom. I have two little boys, ages two and a half and five years old, and they keep me very busy. And so whether I have time for a passion project is definitely a discussion for another day. However, I've developed an interest in and something that I'm just learning more about is that many boys and young men today are struggling to find purpose and belonging as they are falling behind in school and work and their relationships and. And there's research behind this as well. And so as a mother of two little boys, I want to better understand how to guide and support them so that they can grow with confidence and resilience in today's world. So I'd say that's something that I'm very interested in at the moment. So yeah.

[Dottie Schindlinger]

Well, Tracy, thank you so much for joining us back on the show.

[Tracy Lee Brown]

Thank you. No, thank you for having me.

[Dottie Schindlinger]

We've been joined today by Tracy Lee Brown, director at PwC's Governance Insight Center. Tracy, thank you so much for being on the show.

[Megan Day]

Great stuff, Dottie. I love that we have like a three peat now on the show. This is, I feel like a historical moment for us, but great conversation and I think a very important reminder of how this all started. The ESG stuff, if you will, is that institutional investors, they're still looking for transparency and that's going to come from the work that these organizations are doing.

[Dottie Schindlinger]

I think that's right, Megan. Right. At the end of the day, well, it's about a couple things, right? It's really about how do you explain to potential investors and shareholders and current investors and shareholders what it is that you're actually doing as a company, what is your strategy? How does this tie into creating long term value? And quite frankly, sustainability should always tie back to that. Right? When you think about the importance of sustainability, it's sustainability of the business as well as it is around environmental sustainability or social sustainability. It's how do we make sure that the things that we are doing to grow the value of this company align with long term growth and value, more broadly speaking, in the communities we serve, in the places where we have physical operations, in the places where we hire employees and support the workforce. You have to think across that entire value chain. And I think what Tracy is pointing out is those things all still matter to businesses. It's not like you know, the political conversation of the day changes that math. You know, I mean, it just maybe makes it a little less popular, but it doesn't mean that it's not still good for your long term value and the growth of your business. And she also, I think is is helpful in pointing out, you know, companies don't just operate in a vacuum, right. They don't just operate within one geographic region often and they are beholden to regulation and compliance in other parts of the world, like in the EU or even in California. Right. Wherever you're doing business, you have to be really mindful of what are the norms and the standards in that area as well, because you have to uphold them if you plan to do business.

[Megan Day]

There's. Yeah, absolutely. And you know, just because ESG has become a tainted word doesn't mean that stakeholder expectations, investor expectations have changed. Really. I think they're higher than ever. Everyone will agree to that. There's more at stake than ever before. And so it just means that boards are navigating a bit of a paradox that, you know, I guess continues to make their job harder than ever. And again, this all comes back to.

[Dottie Schindlinger]

Who wants to be a board member anyway. Well, Megan, I think that's probably a good place for us to wrap up another episode of the Corporate Director Podcast, the Voice of Modern Governance. I'd like to say a few special thank yous, first and foremost to our three peak guests, Tracy Lee Brown from PwC podcast producers Kira Ciccarelli, Laura Klein and Steve Clayton. Our sponsors for the show, PwC, KPMG, Wilson Cincinni and Meridian Compensation Partners. And most especially, thank you to Diligent. If you like our show, please be sure to give us a rating on your podcast player of choice. You can also listen to our episodes and see more from the Diligent Institute by going to diligent.com resources. Thank you so much for listening.

[Podcast Narrator]

You've been listening to the Corporate Director Podcast to ensure that you never miss an episode, subscribe to the show in your favorite podcast player. If you'd like to learn more about corporate governance and tools to help directors do their job better, visit www.digent.com. thank you so much for listening. Until next time.