Sustainability remains an afterthought in boardrooms
While significant progress has been made in raising boardroom awareness and acceptance of the sustainability agenda, capacity challenges and a lack of expertise at the board level has created a gap between intentions and prioritisation of the environment, social, and governance (ESG) agenda.
Most importantly, while societal expectations for organisations on ESG issues are increasing, most boards do not feel financial pressure to act, according to The Role of the Board in the Sustainability Era 2023 report by Heidrick & Struggles, INSEAD, and BCG.
Specifically, 68% of global board directors surveyed for the report stated that sustainability considerations have “no effect” or a “slight effect” on financial performance. Nevertheless, 52% of directors are acting on sustainability because they believe it is the right thing to do, while 51% cite legislative requirements.
Despite 79% of board members claiming a clear understanding of the strategic opportunities and risks of sustainability, only 29% feel they have sufficient knowledge to challenge management on sustainability plans.
Alice Breeden, Co-Leader of the European CEO and Board at Heidrick & Struggles, said, “If progress on sustainability is to improve, further education, broader director diversity, and greater prioritisation of ESG in the boardroom must be standardised to meet the challenges of the current environment.”
Directors reported increasing expectations from capital providers and the need to attract and retain talent as drivers of action on sustainability. However, only 25% see long-term financial risks from not integrating sustainability, with 10% anticipating negative impacts on financial results and 13% perceiving a threat to survival.
Sonia Tatar, Executive Director of the INSEAD Corporate Governance Centre, concluded, “More than ever, the weighted responsibility on boards is pointing to the imperative for targeted education to bridge the knowledge gaps which are fundamental in driving governance transformation starting from non-conventional stewardship from the top to collective leadership across the various stakeholders and within the organisational spectrum that delivers sustainable impact and solutions.”