A recent report released by the advisory firm Egon Zehnder has found that while boards are prioritizing sustainability, there is much room for improvement – and getting the right composition, culture, mindset and skills are key for driving environmental, social and governance (ESG) agendas.
The study, “Boards: Stepping Up as Stewards of Sustainability” found that just over a quarter of the directors were members of a relevant committee and 45% of committees were assessed to be engaged with environmental, social and governance (ESG) issues.
The report makes four recommendations that would help companies increase their sustainability engagement:
- Move ESG to the core of board activities
“This requires a board, guided by the chair, to embrace a flexible approach, knowing that plans will change as the journey evolves.”
- Embrace ESG board education and self-reflection
“While training sessions and expert consultations are useful tools at the beginning of the sustainability journey, board members need to take it upon themselves to be curious and stay on top of relevant ESG issues.”
- Ensure diversity of age and gender to challenge mindsets
“The survey found that diversified boards tend to function better than homogenous entities. While there has been improvement in the gender mix, companies would benefit from adding younger people to their boards, to gain a wide range of perspectives.”
- Shake up culture and board dynamics
“Being cognizant of the potential of diverse, courageous, and visionary boards is an important step on the path to sustainability. Boards should challenge current practices and brainstorm new ways of operating with ESG at the core.”
The study highlights a link between diversity and ESG engagement, and notably that women and younger board members have a positive effect on corporate sustainability. A sustainability-engaged board also requires the right mix of individuals.
Besides, the authors emphathize that individuals differ in terms of their understanding of and engagement with sustainability. “Board members may include those with an individual interest or passion in sustainability but are unlikely to drive action; those having some interest in individual sustainability topics or solutions; those who will drive change in the organization; and as those engaging with sustainability as a systemic challenge. Boards increasingly need those further down this ‘span of influence’ to meaningfully integrate sustainability into their activities and decisions.”, the report says.
Source: Egon Zehnder