New Report from Spencer Stuart and Diligent Finds 71% of Boards Are Incorporating ESG Into Their Company Strategy, with 85% Taking Action to Increase Fluency on ESG
Other findings include: Nearly half of boards are incorporating ESG into executive compensation and director appointments, and ESG discussions in the boardroom are more frequent
Seventy-one percent of corporate boards are incorporating environmental, social and governance (ESG) objectives and goals into overall company strategy, with 85% taking action to increase fluency on ESG, according to a new report released by Spencer Stuart, a global leadership advisory firm, and Diligent, the global leader in modern governance providing SaaS solutions across governance, risk, compliance and ESG.
The report Sustainability in the Spotlight: Board ESG Oversight and Strategy is powered by Diligent Institute, the research arm and think tank of Diligent, and Spencer Stuart. It reveals how nearly 600 global board directors are addressing ESG and structuring oversight to help their organizations address the opportunities and risks that affect their long-term success. The survey finds that a plurality of boards (43%) are placing primary oversight of ESG at the full board level. Meanwhile 30% house ESG oversight within the Nominating and Governance committee and 15% within the ESG/Sustainability committee, indicating that they may become a more common element of the board committee structure in the future.
See related article: ESG awareness is growing among corporate directors: PwC survey
“In our work with boards – and in the overwhelming response rate to this survey – we are seeing growing interest in how to best structure oversight of ESG,” said Julie Hembrock Daum, who leads Spencer Stuart’s North American Board Practice. “Because little guidance exists, many boards are still figuring out their way forward. The data from this survey provide a fascinating look at how they are doing it.”
Among the top findings:
- Relatively few companies have governance structures in place to act on ESG goals. Even as shareholders and other stakeholders increase their focus on ESG, only a third (33%) of respondents say their organizations are considering rethinking their ESG structures and practices.
- The pandemic has accelerated ESG discussions in the boardroom. Before the pandemic, about 20% of respondents said they rarely or never discussed ESG. Two years later, this number is down to 4%. Meanwhile, the percentage who say they discuss ESG at every or nearly every meeting has more than doubled, from 15% to 34%.
- ESG goals and metrics are increasingly incorporated into other elements of business. 71% of respondents are incorporating ESG goals and metrics into their overall company strategy. Meanwhile 52% are incorporating ESG into integrated risk management, 48% into criteria for director appointments, and 46% in executive compensation.
- Boards are building their ESG competency. The majority of respondents (85%) are taking some action to increase board competency and fluency around ESG, with 42% bringing in outside consultants and 38% engaging in director education and upskilling.
“ESG has moved from afterthought to strategic imperative, and this survey shows us that the majority of boards understand the importance of setting an ESG strategy to their organization’s long-term success,” said Dottie Schindlinger, Executive Director of the Diligent Institute. “However, many organizations struggle with making ESG actionable, and we’re seeing increased demand for education and upskilling to increase board fluency around ESG.”
About the Survey:
The report Sustainability in the Spotlight: Board ESG Oversight and Strategy is powered by Diligent Institute, the research arm and think tank of Diligent, and Spencer Stuart, a global leadership advisory firm. The findings are drawn from a survey of 590 corporate directors, spanning both public and private companies, conducted globally from February 10 to March 14, 2022. About three-quarters of the respondents (72%) represent U.S.-based companies, with the remainder representing companies based elsewhere across the globe. More than three-quarters (78%) of respondents represent public companies, with the remainder representing private companies. The survey was promoted globally to Diligent and Spencer Stuart contacts and advertised on social media and in email newsletters.