By Valeria Genesio*
Governance often goes unnoticed. In today’s ESG-focused world, the “E” for Environment tends to dominate the conversation. The “S” for Social fits neatly into sustainability reports and marketing campaigns. But the “G”? Too often relegated to a technical matter, left to corporate legal departments.
Yet, it is precisely in governance – the management and oversight of a company – where the deepest alignment between an organization’s actions and its stated values is revealed.
When we talk about governance, we usually think of internal management: organizational charts, employee relations, inclusion policies, codes of ethics, and compliance systems. ESG policies of leading institutional investors and listed companies largely focus on these internal aspects.
However, a true and comprehensive understanding of corporate governance cannot stop at internal procedures.
The real test of governance lies in how a company behaves externally: in the ethics of its business practices, the fairness of its contracts, and the genuine respect – not just formal compliance – it shows to clients, suppliers, competitors, and stakeholders. This is where the declared principles either translate into concrete actions in contracts, negotiations, operational practices, and everyday market decisions.
A striking example comes from the real estate sector, where contract terms – often based on Anglo-Saxon legal traditions – frequently reflect significant imbalances favoring the stronger party. Contracts may include clauses that protect the powerful side through tricky wording or provisions that are difficult to challenge.
All of this is perfectly legal, of course. Freedom of contract and the pursuit of profit are pillars of the free market and cannot be questioned. Yet, there is a fine but crucial line between maximizing profit and abusing economic power: ethics.
Despite this, many companies proudly display their “G” credentials in sustainability reports and on their websites, showcasing sophisticated internal appointment procedures or risk management systems. Sometimes, even anti-corruption efforts are touted as hallmarks of good governance, as if mere legal compliance were a sufficient measure of effective management.
It is important to remember that ESG adherence is voluntary and demands a commitment beyond simple legal compliance.
Being ESG-compliant is appealing and good for brand image, but it cannot be reduced to a marketing strategy stripped of its original intent.
Those who voluntarily adopt ESG standards commit to higher levels of responsibility and sustainability. Limiting governance to internal compliance betrays the very spirit of ESG: building trust, ensuring fairness, and promoting more sustainable and equitable economic behaviour.
Governance must be reclaimed in its broadest and highest sense: as a company’s social responsibility both within and outside the organization.
The OECD Principles on Corporate Governance (2023) make this clear: effective governance requires not only sound internal structures but also adherence to ethical market practices, promotion of fair competition, and protection of external stakeholders’ interests.
Similarly, the UN Guiding Principles on Business and Human Rights emphasize that companies must integrate respect for fundamental rights across all their activities, including contractual relationships.
Practical steps can help close this gap. First, ESG-oriented companies should explicitly include fairness, equity, and respect for counterparties in their codes of conduct. Not just abstract ethics, but principles actively lived in daily business practices.
It is essential to adopt fair contract models, avoiding aggressive negotiations and abuses of economic or contractual power, which are often unnecessary and cause unjust and avoidable harm to the other party.
Another practical measure is to evaluate suppliers and partners not only on environmental (E) and social (S) criteria but also on transparency, ethics, and contractual fairness (G). Internal training programs can foster a culture of ethical behaviour and fairness in negotiations.
Finally, transparent external communication is necessary: ESG reports should include not only internal governance aspects but also the principles guiding commercial relationships and corporate conduct within society.
The “G” in ESG cannot be a mere formal label. Governance is, in a sense, a rediscovery of the value of the “gentleman’s agreement” — a trust once sealed by a handshake that modern business seems to have forgotten. Writing rules is not enough; living them every day in every business relationship is what makes sustainability genuine and credible.
*President of Agedi