- A new report by Heidrick &
Struggles, INSEAD and BCG, found that more than two-thirds of
directors (68%) feel that sustainability has little impact on
financial performance today, and only 10% believe sustainability
will negatively affect medium- to long-term financial results.
- The survey also found that only 29% of global board directors
feel completely knowledgeable enough to challenge or monitor
execution on sustainability, and 89% rely only on management
updates to stay informed on the topic of ESG.
- A combined 48% of respondents confirmed that knowledge or
experience with sustainability is either "not at all" or just
"slightly" part of the competency matrix for their board
selection.
CHICAGO, July 10,
2023 /CNW/ -- Though significant progress has
been made on boardroom awareness and acceptance of the
sustainability agenda, capacity challenges, and a self-declared
lack of expertise at the board level has revealed a gap between
intentions and prioritization of the environmental, social and
governance (ESG) agenda. That is according to a new global survey
of board directors published today by Heidrick & Struggles
(Nasdaq: HSII), a premier provider of global leadership advisory
and on-demand talent solutions, in partnership with Boston
Consulting Group (BCG), one of the world's leading management
consulting firms, and the INSEAD Corporate Governance Centre, a
global INSEAD centre of excellence for research, innovation and
impact in corporate governance.
The report finds that, despite greater societal expectations on
businesses in terms of ESG, most boards do not feel financial
pressure to act on sustainability issues. 68% of those surveyed
said that sustainability considerations have "no effect" or a
"slight effect" on financial performance today, but 52% of those
surveyed said they are acting on sustainability because it's the
'right thing to do', with a similar number (51%) citing legislative
requirements.
The Role of the Board in the Sustainability Era
2023 is a global survey examining the perceptions of
boards towards a full spectrum of ESG issues, as well as how the
drive for sustainability is influencing and reorganizing the
efforts of boards. The findings reveal how boards are adapting
their own composition, governance, and process considerations with
varying degrees of success to better meet their organizations'
ambitions and stakeholders' expectations for sustainability.
This tension between the importance of sustainability, and the
time and effort required to consistently give it the attention
needed to prioritize it is a persistent theme, according to the
report. Although a significant majority (79%) of board members
surveyed said their board had a very clear understanding of the
strategic opportunities and risks sustainability presents, only 29%
completely agreed they had sufficient knowledge to effectively
challenge management on sustainability plans and ambitions and
exercise oversight on their execution.
The survey highlights that these challenges are a global
phenomenon, with very few differences evident across regions and
sectors, despite very different traditions of corporate governance
and responsibility.
"The job of the board today is more challenging than in
recent history. Against the backdrop of economic uncertainty,
rising social activism, and critical climate targets that are
slipping from reach, boards require a new breadth of expertise that
far extends beyond the traditional, operational, and financial
health of a business," said Alice
Breeden, Co-Leader of the European CEO & Board at
Heidrick & Struggles. "If progress on sustainability is to
improve, it is clear that further education, broader director
diversity, and greater prioritization of ESG in the boardroom must
be standardized to meet the challenges of the current
environment."
Stakeholder pressure motivating action
Directors cited increasing expectations from capital providers
including investors and the importance of sustainability in
attracting and retaining talent as major motivators of action. A
smaller share—about one-quarter—see a longer-term financial risk
from not integrating sustainability into the business: 10% expect a
negative impact on medium to long term financial results and 13%
see a threat to survival in the medium to long term.
"Today, organizations, including their boards, are completely
occupied with the upcoming legislative and reporting requirements.
Action on sustainability is mostly driven by stakeholder pressure.
This triggers risk averse and defensive behavior, leading to
organizations that only do the bare minimum," said Ron Soonieus,
a Senior Advisor at BCG, a Director in Residence at INSEAD, and a
coauthor of the report. "While the new rules and regulations
serve a clear purpose, compliance does not guarantee the long-term
success of the company. Boards struggle to see that, and a fair
share believe that if they comply, sustainability is covered. Only
34% of respondents say they have a clear understanding of how
long-term trends impact the future value of the company. Boards
have a key role to play in ensuring sufficient weight is put on
making sustainability an integral part of the long-term strategy,
and to start seeing it as a source of competitive advantage."
Boards increase focus on sustainability—but gaps
remain
There has been an undeniable shift in the expectations for the
role of business in society which has created new challenges and
competency requirements for board members. These heightened
expectations have added to boards' traditional responsibilities to
oversee finances, manage risk, and select company leadership - all
at a time when boards must rapidly upskill on the implications of
AI, new geopolitical risk, and a changing world of working
models.
More than two-thirds of respondents (69%) reported that boards'
expanding remit is increasing time requirements for directors. The
share was higher for directors in the energy (77%) and finance and
insurance (74%) sectors, two sectors in which balancing the world's
need for more energy with climate change is creating significant
new risks and opportunities.
"Sustainability has become part of boards' fiduciary duty and
steadily gaining priority on boards' agenda as its importance
continues to permeate across the fabric of business and society,"
said Sonia Tatar, Executive
Director of the INSEAD Corporate Governance Centre.
She added that, "More than ever, the weighted responsibility on
boards is pointing to the imperative for targeted education to
bridge the knowledge gaps which are fundamental in driving
governance transformation starting from non-conventional
stewardship from the top to collective leadership across the
various stakeholders and within the organizational spectrum that
deliver sustainable impact and actions."
Are Board Member Profiles to Blame?
A combined 48% of respondents confirmed that knowledge or
experience with sustainability is either "not at all" or just
"slightly" part of the competency matrix for their board selection.
Perhaps surprisingly, this rises to 24% of board members stating
that sustainability experience is "not at all" part of the
assessment criteria for CEO hires.
Integrating sustainability into the business
Directors see room for improvement when it comes to integrating
sustainability into decision-making across the whole business. 66%
said that sustainability considerations should be fully integrated
into business strategy - but just 38% said that that is the case
today.
When asked what was preventing them from spending meaningful
time on sustainability planning, more than 72% cited the need to
devote time to non-sustainability-related, high-priority
topics.
While challenges remain with dedicating time and resources to
prioritizing sustainability as a key focus area, leaders
highlighted the value and importance of integrating sustainability
into other strategic considerations as essential to driving greater
sustainability outcomes.
ENDS
About the report:
The Heidrick & Struggles, BCG and INSEAD Corporate
Governance Centre survey captured insights from 879 respondents
from more than 25 countries and 19 industries. In parallel, a
series of roundtables and discussions were conducted with some 200
directors in cities around the world.
The respondents to the survey, conducted in early 2023, have
extensive board experience: two thirds are board members with a
tenure of at least 6 years, and one-third have served in their
roles for more than ten years. Compared with results from a similar
survey published in 2022, our current survey garnered more than
three times the number of respondents—an indication of the
increased resonance of sustainability among directors broadly.
https://www.heidrick.com/-/media/heidrickcom/publications-and-reports/the-role-of-the-board-in-the-sustainability-era.pdf
About Heidrick & Struggles
Heidrick & Struggles (Nasdaq: HSII) is a premier provider of
global leadership advisory and on-demand talent solutions, serving
the senior-level talent and consulting needs of the world's top
organizations. In our role as trusted leadership advisors, we
partner with our clients to develop future-ready leaders and
organizations, bringing together our services and offerings in
executive search, diversity and inclusion, leadership assessment
and development, organization and team acceleration, culture
shaping and on-demand, independent talent solutions. Heidrick &
Struggles pioneered the profession of executive search more than 65
years ago. Today, the firm provides integrated talent and human
capital solutions to help our clients change the world, one
leadership team at a time.® www.heidrick.com
About INSEAD, The Business School
for the World
As one of the world's leading and largest graduate business
schools, INSEAD brings together people, cultures and ideas to
develop responsible leaders who transform business and society. Our
research, teaching and partnerships reflect this global perspective
and cultural diversity.
With locations in Europe (France), Asia (Singapore), the Middle
East (Abu Dhabi), and
now North
America (San
Francisco), INSEAD's business education and research spans
four regions. Our 165 renowned Faculty members from
42 countries inspire more than 1,500 degree participants
annually in our Master in Management, MBA, Global
Executive MBA, Specialised Master's degrees (Executive Master in
Finance and Executive Master in Change)
and PhD programmes. In addition, more than 11,000
executives participate in INSEAD Executive
Education programmes each year.
INSEAD continues to conduct cutting-edge research and innovate
across all our programmes. We provide business leaders with the
knowledge and awareness to operate anywhere. Our core values drive
academic excellence and serve the global community as The Business
School for the World.
About INSEAD Corporate Governance Centre
The INSEAD Corporate Governance Centre (ICGC) is engaged in
making a distinctive contribution to the knowledge and practice of
corporate governance globally. Its vision is to be the leading
center for research, innovation, and impact in the field. Through
its educational portfolio and advocacy, the ICGC seeks to build
greater trust within the public and stakeholder communities, so
that businesses are a strong force for improvement, not only of
economic markets but also for the global societal environment.
About Boston Consulting Group (BCG)
Boston Consulting Group partners with leaders in business and
society to tackle their most important challenges and capture their
greatest opportunities. BCG was the pioneer in business strategy
when it was founded in 1963. Today, we work closely with clients to
embrace a transformational approach aimed at benefiting all
stakeholders—empowering organizations to grow, build sustainable
competitive advantage, and drive positive societal impact.
Our diverse, global teams bring deep industry and functional
expertise and a range of perspectives that question the status quo
and spark change. BCG delivers solutions through leading-edge
management consulting, technology and design, and corporate and
digital ventures. We work in a uniquely collaborative model across
the firm and throughout all levels of the client organization,
fueled by the goal of helping our clients thrive and enabling them
to make the world a better place.
Media Contacts:
Chiara
Pierdomenico:
cpierdomenico@heidrick.com
Eric Gregoire:
Gregoire.Eric@bcg.com
Aileen Huang:
aileen.huang@insead.edu
Cheryl Ng: cheryl.ng@insead.edu
Gwenaelle Hennequin:
gwenaelle.hennequin@insead.edu
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