Boardrooms Disregard Sustainability

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by KnowESG
KnowESG_Boardrooms neglect sustainability
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Despite progress being made in increasing awareness and acceptance of the sustainability agenda in boardrooms, there is a gap between intentions and prioritisation of environmental, social, and governance (ESG) issues due to capacity challenges and a lack of expertise at the board level.

The Role of the Board in the Sustainability Era 2023 report by Heidrick & Struggles, INSEAD, and BCG reveals that while societal expectations for organisations to address ESG issues are rising, most boards do not feel financial pressure to take action.

According to the report, 68% of global board directors surveyed stated that sustainability considerations have a minimal or slight impact on financial performance. However, 52% of directors are still taking action on sustainability because they believe it is the right thing to do, while 51% cite legislative requirements.

Despite 79% of board members claiming to understand the strategic opportunities and risks of sustainability, only 29% feel adequately knowledgeable to challenge management on sustainability plans.

Alice Breeden, Co-Leader of the European CEO and Board at Heidrick & Struggles emphasised the need for standardised further education, greater director diversity, and increased prioritisation of ESG in the boardroom to improve progress on sustainability in the current environment.

Directors reported that increasing expectations from capital providers and the need to attract and retain talent are driving action on sustainability. However, only 25% of directors perceive long-term financial risks from not integrating sustainability, with 10% anticipating negative impacts on financial results and 13% seeing it as a threat to survival.

Sonia Tatar, Executive Director of the INSEAD Corporate Governance Centre, concluded that there is an increasing responsibility on boards to bridge knowledge gaps through targeted education. This is essential for driving governance transformation and fostering collective leadership across stakeholders to achieve sustainable impact and solutions.

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Source: hrmasia


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