A new Diligent Institute and Spencer Stuart survey has found that nearly half of corporate directors around the world want more clarity on how their company’s sustainability goals link to their larger corporate strategy.
The survey, which polled nearly 1,000 corporate directors representing companies based in the European Union or the US, found 45% of respondents wanted greater insight into how their company’s ESG (environmental, social, and corporate governance) goals are aligned with their overall business strategy.
According to the report, the need for clarity on ESG comes amid heightened disclosure expectations and requirements from governments. The survey found that 81% of UK directors are taking action to ensure their ESG strategy is reflected in annual reports, and 73% are enhancing ESG disclosures.
Despite the challenges, the survey found that most companies globally view ESG in terms of opportunity rather than risk. However, there is a geographical divide. European companies are more likely to view ESG as an opportunity than their US counterparts, likely due to the term now being associated with the culture wars in the US.
“Whether you treat ESG as a risk or opportunity, or both, successful organisations need to understand their data to ensure they are staying compliant with disclosure requirements and meeting the expectations of shareholders and stakeholders.” said Lisa Edwards, executive chair of Diligent Institute. “These findings suggest that boards are taking sustainability seriously, and looking for greater clarity into how it factors into their overall corporate strategy.”
The survey also found:
- The biggest obstacles to ESG progress are centred on strategy. 22% of directors indicated competing business or strategic topics on the board agenda, and the same amount reported a lack of clarity for what ESG means to the business.
- Only 2% of directors identify public backlash against ESG as being one of the largest obstacles to ESG strategy and implementation.
- Many organisations have reported plans to strengthen their focus on ESG in the next 5 years. 90% have incorporated environmental goals or metrics into their business, and 87% have done the same for social goals/metrics.
- 29% predict a more concerted effort on ESG initiatives in the next five years, and 18% predict stronger linkage between ESG initiatives and business impact.
- ESG is a global issue, but European boards are more engaged and optimistic about ESG issues than their US counterparts. 62% of European boards evaluate progress on ESG goals and strategies on a quarterly basis or more, compared to 43% of US boards. Additionally, 23% of European boards feel ESG metrics led to better performance of their stock, compared to just 10% of US boards.
- In the US, only 25% of directors believe their organisations have effective leadership and high ambition across both environmental and social issues, compared to 50% of directors in Europe.
- The boardroom has heightened focus and energy on reporting. 61% are taking extra care to ensure that their ESG strategy is adequately reflected in annual reports/filings.
- 53% of directors say their organisations are enhancing current ESG disclosures.
Jason Baumgarten, head of Spencer Stuart’s global CEO and Board Practice and the firm’s sustainability initiatives, added:
“Our survey shows that many boards have made great strides in formalising their approach to sustainability by defining oversight responsibilities and establishing sustainability metrics in many parts of the business. Companies that go further and rigorously define sustainability strategies that link to their business model have the opportunity to unlock tremendous value and unleash the next wave of growth.”
Earlier this year, Sustainable Future News spoke with the executive director of Diligent Institute, Dottie Schindlinger, to discuss the findings of their ‘State of ESG’ report and to understand how corporate leaders are embracing ESG into their organisations.
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