New Study Finds Boards Need Four Key Ingredients to Become Stewards of Sustainability
- Survey of the 100 largest companies globally reveals that while 80 percent of boards now have sustainability committees, crucial elements are missing to turn intention into action
A report by Egon Zehnder, the world’s preeminent leadership advisory firm, has found that while boards are prioritizing sustainability, there is much room for improvement – and getting the right composition, culture, mindset and skills are key for driving environmental, social and governance agendas.
The study, “Boards: Stepping Up as Stewards of Sustainability,” 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 issues.
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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.”
Source: Egon Zehnder