A majority of board members worldwide (75%) agree that a coherent environmental, social and governance (ESG) strategy helps to create sustainable organizational value and stronger financial outcomes; however, many corporate directors believe there are limited resources available to help tackle the specific areas of governance and environmental issues. This is according to a survey of 349 board members at global organizations conducted by WTW, a leading global advisory, broking and solutions company, and the Nasdaq Center for Board Excellence, a convener of board and executive leaders dedicated to advancing governance excellence in the boardroom and beyond.
The top factors influencing board members to prioritize sustainability themes are alignment with business strategy (85%), moral and ethical reasons (78%), long-term organization value creation opportunities (74%) and business reputation among stakeholders (73%). Over half of respondents cited shareholder/investor attraction and expectation as a factor.
“Board members are evolving their ESG agenda from reacting to stakeholder pressure to proactively linking ESG to business strategy,” said Kenneth Kuk, senior director, Work & Rewards, WTW. “As a result, we are seeing greater interest in addressing skills and resource gaps and more emphasis on oversight of emerging risks.”
Most companies currently rank social – human capital (82%) and governance (70%) areas in their top three ESG priorities. But only half of organizations rank environmental – climate in the top three. While companies report a minor skills gap in the areas of social and governance, half of organizations (48%) report room for improvement with respect to skills and knowledge base for dealing with environmental – climate concerns, revealing an opportunity to enhance current skills and knowledge in this priority area.
The survey also reveals the need for stronger governance in the boardroom. Only three in five respondents think their board has dedicated sufficient time and resources to this area. This exposes the company to a range of risks, including cybersecurity and data privacy and management, succession planning and board effectiveness.
Nevertheless, as boards’ oversight rapidly increases, companies are acknowledging a need for specialist responsibilities in the coming years. While oversight of comprehensive governance topics will continue to be a full board matter, more organizations expect to have a dedicated ESG, corporate social responsibility or sustainability committee in the next three years.
The Nasdaq Center for Board Excellence (the “Center”) and WTW joined forces to provide insights into modern boardroom dynamics to help boards find new ways of assessing and improving effectiveness. The Center promotes a culture of innovation, curiosity and long-term value creation for like-minded leaders to drive positive and meaningful impact. Through resources and experiences, the Center seeks to advance the overall quality of corporate governance across the expanded governance community.