The study, “Boards: Stepping Up as Stewards of Sustainability,” which draws on insights from The 2022 Sustainability Board Report, found that just over a quarter of the directors were members of a relevant committee and 45 percent of committees were assessed to be engaged with environmental, social and governance (ESG) issues.
Ahead of COP 27, the study charts a path for boards, finding that diverse boards with a culture of courage, a divergence of skills, and a flexible mindset can extend this focus to put ESG at the core of how they do business.
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.
“There is a bravery in not accepting incrementalism,” says Jill Ader, chair of Egon Zehnder. “Give boards the option to go far, and then the option to go further, and they’ll likely take the further option.”
For more information on Egon Zehnder’s “Boards: Stepping Up as Stewards of Sustainability,” visit https://www.egonzehnder.com/stewards-of-sustainability.
About Egon Zehnder
Egon Zehnder is the world’s preeminent leadership advisory firm, inspiring leaders to navigate complex questions with human answers. We help organizations get to the heart of their leadership challenges and offer honest feedback and insights to help leaders realize their true being and purpose. Our 560 consultants across 63 offices and 37 countries are former industry and functional leaders who collaborate seamlessly across geographies, industries and functions to deliver the full power of the Firm to every client, every time. We believe that together we can transform people, organizations and the world through leadership.
For more information, visit egonzehnder.com and follow us on LinkedIn and Twitter.
The Sustainability Board Report (TSBR) is an independent not-for-profit project. We aim to showcase different dimensions of sustainable leadership and corporate governance. By developing best practice and thought leadership, our reports help individual leaders, organisations and investors to understand the changing landscape of environmental, social and governance (ESG) preparedness, consciousness and competence.
We collaborate with business leaders, non-executive directors, board advisors and academia to create meaningful, actionable, and potent narratives. TSBR also releases an annual report on ESG preparedness of boards of directors of the world’s largest publicly listed companies. Our work has featured in leading business and academic publications and is considered a trusted resource for sustainable leadership and governance insights.
To learn more please visit www.boardreport.org.
Deeper Dive: The Study’s Key Findings
- Most boards are aware of the sustainability challenge and are at different stages of engaging with their stewardship roles on driving ESG integration. They do not, however, have the skills and knowledge to fully integrate sustainability into the boards’ activities and responsibilities. Making step changes in how the board functions requires vision and courage.
- The findings highlight 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.
- Four actions are identified to increase board maturity on sustainability. These are moving ESG to the core of board activities, rather than being a sideline activity; developing board members through education and exposure; challenging mindsets through increasing diversity; and shaking up board dynamics and culture through ensuring the right blend of individuals on the board.
- 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. Egon Zehnder‘s stewardship assessment framework can help identify ways in which individuals can bring value to the board.