A New Egon Zehnder Study Says Boards Require Four Key Ingredients to Become Sustainability Stewards
A report from Egon Zehnder, the world's leading leadership advisory firm, found that boards are putting sustainability at the top of their list of priorities, but there is still a lot of room for improvement. Getting the right composition, culture, mindset, and skills is key to driving environmental, social, and governance (ESG) agendas.
The study "Boards: Stepping Up as Stewards of Sustainability," which used information from the 2022 Sustainability Board Report, found that just over a quarter of the directors were members of relevant committees and that 45% of those committees were involved with environmental, social, and governance (ESG) issues.
Before COP 27, the study lays out a path for boards, finding that diverse boards with a culture of courage, a range of skills, and a flexible way of thinking can extend this focus to put ESG at the centre 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 means that the board, led by the chair, needs to be flexible, knowing that plans will change as the journey goes on.
Embrace ESG board education and self-reflection. At the beginning of the sustainability journey, training sessions and consultations with experts can be helpful. However, board members need to be curious and keep up with ESG issues on their own.
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. A big step toward sustainability is being aware of the potential of boards with people from different backgrounds, who are brave, and who have a vision. Boards should question how things are done now and come up with new ways to work that put ESG at the centre.
“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.”
Source: Egon Zehnder
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