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Boardrooms holding back progress towards ESG leadership, survey finds

Boardroom office sustainability

A survey of 200 directors and senior managers at large businesses has revealed that four in 10 don’t get the support they would like from their boardrooms in taking a holistic and ambitious approach to environmental, social and governance (ESG) challenges.

Conducted by EY, the Long-Term Value and Corporate Governance Survey polled professionals across 25 sectors and 15 nations in Europe, collecting opinions on ESG-related risks and opportunities

More than four in five of those surveyed (84%) say that their stakeholders are increasingly expecting their firms to be a force for good in terms of environmental and social sustainability. This was a considerable increase in proportion from last year’s survey (66%), adding to a growing body of evidence that Covid-19 has increased awareness of ESG-related issues.

Moreover, most of those surveyed could point to the economic advantages of ESG leadership, with the most commonly cited being the development of new sustainable products and services.

Yet the survey revealed that many professionals feel that board members are hampering progress towards a future in which ESG is properly embedded into corporate strategy. 43% of respondents said there is a lack of commitment from the board to fully integrate ESG factors – up from 28% in last year’s iteration of the survey. And more than half of respondents said there is a “significant” difference of opinion among leadership on how to balance short-term and long-term outcomes.

This, in practice, means many professionals believe their board is not planning properly for the necessary long-term changes in investment, business models and skills to thrive in the coming decades.

“We’ve reached a crossroads in the ESG agenda,” said EY’s area managing partner for the EMEIA region, Julie Teigland.

“The evolution in how businesses and their stakeholders consider this topic has been accelerated by the Covid-19 pandemic, as has industry engagement with COP26 and commitment to support climate goals.

“At the same time, inside companies, executives are coming through who are passionate about making a difference to the planet and people and about building their organizations’ resilience. Breaking the barriers companies face in establishing ESG as part of their corporate strategy is the next step. ESG agendas that unlock long-term value must be tied to governance initiatives that focus on collaboration.”

The report on the survey findings sets out several recommendations for boards looking to approach ESG not as a tick-box exercise but as something that must be embedded in business strategy. For example, it recommends that businesses link executive pay models to the company’s ESG strategy, going beyond one arbitrary link to multiple links with clear metrics and an acknowledgement of whether targets are ambitious in context.

Do want more insights on how to align your ESG strategy and engage stakeholders to commit to the same goal? Read our whitepaper, ‘the Art of Alignment’.

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