Growing interest in environmental, social and governance (ESG) issues from investors, employees, customers and other stakeholders has put pressure on companies to act. And as companies respond, the board has become a central player in overseeing and integrating ESG risks and opportunities into their organizations—even as they rush to gather the experience and expertise needed to lead in the topic.
In light of this, Spencer Stuart and Diligent Institute surveyed 590 corporate directors for insights on how boards are structuring oversight of ESG issues, how they are adjusting to address ESG topics and how they are preparing directors to fulfill their responsibilities as they evolve and expand.
Our survey sheds light on a number of areas of boards’ ESG governance:
A plurality of respondents (43 percent) say primary ESG oversight is at the full board level, followed by nominating/governance committee (30 percent), and ESG/sustainability committee (15 percent).
Despite the intense focus on ESG from shareholders and other stakeholders, only a third (33 percent) of respondents say that their organizations are considering rethinking their structures and practices around ESG.
The pandemic accelerated ESG discussions in the boardroom. Before the pandemic, about 20 percent of respondents said they rarely or never discussed ESG. This number is now down to 4 percent. Meanwhile, the percentage who say they discuss ESG at every or nearly every meeting more than doubled, from 15 percent to 35 percent.
ESG goals and metrics are increasingly incorporated into other elements of business; 71 percent of respondents are incorporating ESG goals and metrics into overall company strategy. Another 52 percent are incorporating ESG into integrated risk management, 48 percent into criteria for director appointments, and 46 percent in executive compensation.