While boards are prioritizing sustainability, there is much room for improvement—and getting the right composition, culture, mindset and skills are key for driving ESG agendas, asserts a new report from leadership advisory firm Egon Zehnder.
The firm’s new study, Boards: Stepping Up as Stewards of Sustainability, which draws on insights from The 2022 Sustainability Board Report, 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 ESG issues.
Ahead of COP27, 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,” said Jill Ader, chair of Egon Zehnder, in a news release. “Give boards the option to go far, and then the option to go further, and they’ll likely take the further option.”