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
New York, May 5, 2022 - 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 today by Diligent, the global leader in modern governance providing SaaS solutions across governance, risk, compliance and ESG, and Spencer Stuart, a global leadership advisory firm.
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.
“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.
Diligent is the global leader in modern governance, providing SaaS solutions across governance, risk, compliance and ESG. Serving more than 1 million users from over 25,000 customers around the world, we empower transformational leaders with technology, insights and confidence to drive greater impact and lead with purpose. Learn more at diligent.com.
About Spencer Stuart
At Spencer Stuart, we know how much leadership matters. We are trusted by organizations around the world to help them make the senior-level leadership decisions that have a lasting impact on their enterprises. Through our executive search, board and leadership advisory services, we help build and enhance high-performing teams for select clients ranging from major multinationals to emerging companies to nonprofit institutions.
Privately held since 1956, we focus on delivering knowledge, insight and results through the collaborative efforts of a team of experts — now spanning more than 70 offices, over 30 countries and more than 50 practice specialties. Boards and leaders consistently turn to Spencer Stuart to help address their evolving leadership needs in areas such as senior-level executive search, board recruitment, board effectiveness, succession planning, in-depth senior management assessment, employee engagement and many other facets of culture and organizational effectiveness. For more information on Spencer Stuart, please visit www.spencerstuart.com.