A survey has found almost half of board members believe their organisations lack the necessary skills and expertise to tackle climate issues.
The survey was headed by WTW, in partnership with the Nasdaq Center for Board Excellence.
These findings are despite the majority acknowledging the potential of robust Environmental, Social, and Governance (ESG) strategies to enhance financial outcomes.
The study, ‘Fostering Corporate Governance and Enhancing Board Effectiveness Survey’, polled 349 board members spanning 44 nations. It found that a remarkable 75% of respondents agreed that an effective ESG strategy leads to sustained organisational value and stronger financial results. The most frequently cited factor influencing the prioritisation of ESG themes, by 85% of respondents, was alignment with the organisation’s business strategy.
However, while the value of ESG strategies is recognised, many board members expressed that their organisations do not place enough emphasis on sustainability issues. Fewer than two-thirds (62%) agreed that their boards have dedicated sufficient time and resources to the governance of ESG priorities.
Additional influences prompting the prioritisation of ESG factors include ethical considerations (78% of respondents), long-term value creation, reputation, and risk mitigation. Regulatory compliance ranked sixth, cited by 71% of participants.
Despite the acknowledgement of ESG value, only half of the respondents ranked environmental and climate issues in their top-three priorities. Human capital and governance were cited as top priorities by 82% and 70% of respondents, respectively.
In terms of ESG governance oversight, while it is currently managed by a combination of the full board and other committees, 61% of respondents anticipate the establishment of a dedicated ESG or sustainability committee within the next three years.
Kenneth Kuk, Senior Director, Work & Rewards at WTW said, “Board members are evolving their ESG agenda from reacting to stakeholder pressure to proactively linking ESG to business strategy. As a result, we are seeing greater interest in addressing skills and resource gaps and more emphasis on oversight of emerging risks.”
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