Board members globally have highlighted a number of challenges related to ESG.
A new survey of company directors worldwide has found that 43 per cent believe their organisation’s ability to execute is one of the most significant threats to achieving ESG goals.
Potential cost increases (35 per cent), organisational culture (32 per cent) and management’s commitment to addressing ESG concerns (30 per cent) were also highlighted as threats in the survey by Boston Consulting Group (BCG) and the INSEAD Corporate Governance Centre.
“Directors have significant scepticism about whether companies they oversee can deliver on ambitious ESG targets,” said BCG managing director and senior partner David Young.
“That makes it more critical than ever that boards enhance their governance of ESG issues, focusing on the matters that are truly material and connected to advantage and value creation for the company.”
About 70 per cent of the directors surveyed said they are either moderately or not at all effective at integrating ESG into company strategy and governance.
Lack of knowledge, data or capabilities was the top roadblock to effective board oversight of ESG according to 44 per cent of respondents.
Only 47 per cent of directors believed that their board has sufficient competence and experience on ESG matters to challenge management about ESG plans and exercise board oversight on execution.
Some boards have already sought to address this issue including 48 per cent that receive regular updates from an internal executive with responsibility for ESG and 40 per cent that are given intermittent updates from external experts.
Climate change vulnerability and carbon emissions were among the top ESG issues across most industries, but only 55 per cent of directors of companies with net zero commitments said that their organisation had actually prepared and published a plan to reach that goal.
“More and more companies are making net zero commitments,” said INSEAD Corporate Governance Centre executive director Sonia Tatar.
“Directors have a critical part to play in ensuring those pledges come with concrete plans and execution as they steward businesses for a sustainable economic performance that drives greater good for society and the environment.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
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