Corporate boards are experiencing significant ‘knowledge gaps’ when it comes to sustainability and its effect on business, a study by Heidrick & Struggles, INSEAD and BCG has found.
The study, The Role of the Board in the Sustainability Era 2023, found that more than two-thirds of directors (68%) believe that sustainability has ‘little impact’ on financial performance today, while just 10% believe it will negatively effect medium- to long-term financial results.
Lack of knowledge
In addition, less than a third (29%) of board directors say that they are ‘knowledgeable enough’ to challenge or monitor execution on sustainability, with 89% relying solely on management updates to stay informed.
Less than half (48%) state that knowledge or experience in sustainability is either ‘not at all’ or only ‘slightly’ integrated into the competency matrix for selecting corporate board members.
“The job of the board today is more challenging than in recent history,” commented Alice Breeden, co-leader of the European CEO and board at Heidrick & Struggles. “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.”
Integrating sustainability into decision making
The research revealed that directors acknowledge the need for enhancement in integrating sustainability into decision-making throughout the entire business. While 66% expressed that sustainability considerations should be fully incorporated into the business strategy, only 38% indicated that this is currently the case.
When queried about the obstacles preventing them from dedicating substantial time to sustainability planning, over 72% pointed to the necessity of addressing high-priority topics unrelated to sustainability.
“If progress on sustainability is to improve, it is clear that further education, broader director diversity, and greater prioritisation of ESG in the boardroom must be standardised to meet the challenges of the current environment,” Breeden added.
