A growing number of companies are embracing environmental, social and governance (ESG) as a strategic business imperative. Whether the pressure comes from investors, regulators, employees or consumers—or inward—efforts are increasingly being made to proactively address these matters.
But the journey to integrate ESG into strategy and risk management can be challenging. To better understand how boards are integrating these matters into their overall governance of risk and strategy, Corporate Board Member recently worked with the EY Center for Board Matters to survey nearly 400 public company directors on their perspectives, practices and forecasts for ESG.
Here are some of the key findings:
• One third of directors view governance (G) matters as an area that presents risks and opportunities for the business. This proportion declines to 27 and 20 percent when it comes to environmental (E) and social (S) issues, respectively. On average, the majority of directors say they are considering ESG issues because compliance, disclosure obligations and shareholder pressure compel them to do so.
• An impressive 82 percent of the boards represented in the survey say they discuss ESG as a part of board composition, refreshment and evaluation discussions.
• Some directors say they’re begun expanding the mandates of the nominating and governance committee and the compensation committee to include environmental and social oversight responsibilities.
• Overall, 37 percent say they’ve performed a sustainability materiality assessment to identify and prioritize the ESG topics that are of highest priority to the company and its stakeholders—40 percent have not, and 23 percent either plan to or aren’t sure.
• Of the 59 percent of directors who say their companies report ESG information externally, 51 percent say they use company-specific metrics/frameworks—and only 21 percent obtain external assurance over their reporting.
Considering the level of stakeholder interest in company ESG practices and performance, boards have many opportunities to consider as they enhance their ESG oversight. The EY Center for Board Matters highlights four of them to help directors strengthen their grip on the issue:
• Shifting from a compliance to a strategic mindset
• Understanding the ESG factors that matter most to the business
• Considering the broadening of key board committee responsibilities to include ESG
• Overseeing how the company is telling its ESG story
Download your complimentary copy of the report to learn more about these opportunities, assess where you and your board stand relative to your peers, and get ideas on some discussion points for your next board meeting.