The shifting priorities of company boards
On key governance issues, from executive compensation to corporate disclosures, company boards are frequently charged with overseeing and guiding the business’s response. And when it comes to ESG matters, that makes them a key player in the fight against climate change.
To carry out that role effectively, board members will need to do three things: tune in to what’s rising up the public agenda, pay close attention to their firm’s current position, and keep their own skills up to date. That can be easier said than done, especially when they also have any number of other business challenges demanding their attention.
So, as the challenging economic environment threatens to dominate everyone’s thinking, how are boards dividing their time? What’s top of their list of priorities, and how does that compare to what they actually spend time on?
ESG has clearly shot up the list of intended priorities for corporate board members in recent years, even overtaking other hot-button issues such as diversity.
That said, that sense of urgency around sustainability hasn’t necessarily translated into boards being able to dedicate time and resources to it. In fact, over the past 12 months, talent management, data security and the board’s own make-up are far more likely to have been a subject of discussion at board level than any environmental matter.
Things are beginning to change though, and that’s a trend which is visible over just the past few years. Indeed, since 2019, more and more company boards have started to actively embed sustainability into their corporate strategy.
There is still much more to be done though. For instance, considerably fewer board members see a connection between progress towards sustainability targets and the company’s financial performance – something which will have to change if big businesses intend to get serious about reducing their carbon footprints.
One option for time-pressured boards is to delegate responsibility for the company’s ESG efforts to a sub-committee. It’s a tactic plenty of boards are already trying out. This isn’t just about passing the buck either. There may actually be a good reason behind it, as sustainability expertise is still considered a low-priority attribute for board members. Those boards looking to delegate, then, may simply be putting ESG into the hands of specialists.
As ever though, progress is fragile. Nearly two-thirds of board members report that a major economic downturn would draw their attention away from ESG and sustainability, at a time when collective efforts are most needed to stop humanity breaching our global warming targets.
