A new report from EY has suggested that corporate boards need to ‘challenge’ management teams into embedding sustainability into their business models, or face a future in which stringent measures may be applied by policymakers.
EY’s research formed part of its EY Europe Long-Term Value and Corporate Governance Survey, which examined the role of governance in sustainable business model innovation, and incorporated insight from 200 directors, CEOs and C-suite leaders.
It found that boards need to ‘lean in’ on management to ensure that sustainability is a business imperative, ‘rationalising investment decision-making so that capital allocations flow to projects that make a difference, boost financial performance, and deliver on their promises.’.
Generating value from ESG
The report also found that just 24% of industry leaders respondents express complete satisfaction with their understanding of how tackling their material ESG priorities will lead to value creation.
Additionally, non-executive directors and chairs show even greater skepticism, with only 8% reporting complete satisfaction, highlighting a significant data and information gap in strategic decision-making at the board level.
It outlined three areas in which corporate boards can take a forward-leaning step when it comes to sustainability in the business environment.
Proactively challenge
‘Proactively challenge’ management to incorporate sustainability into the business strategy, demanding an ambitious strategic vision from management teams, as well as careful examination of supporting business cases.
Think beyond compliance
Advocate for a strategic approach to a firm’s policy and regulatory agenda, aiming to surpass mere compliance and identify areas for strategic advantage over competitors.
The potential of AI
Explore the potential of AI for sustainability. AI, sustainability, and governance are interconnected and require investigation. Responsible governance will enable the organisation to address the environmental, societal, and ethical challenges associated with the sustainability opportunities of artificial intelligence.
“Boards play a key role in maintaining focus on sustainability as a strategic imperative in the face of challenge – reimagining the business for a sustainable future,” commented Julie Linn Teigland, EY EMEIA Area Managing Partner; EY Global Leader, Women.
You can read the full report here.
Read more: ‘Widening gap’ between those taking the most action on climate change, and the least
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