While more board members and senior executives believe that the pandemic increased expectations from stakeholders that companies will strive for ESG-driven growth, there’s a lack of board commitments to ESG integration, said EY recently when releasing results of a survey.
The survey, which polled 200 senior leaders from 15 European countries and 25 industries found a tension between the advantages of ESG-driven corporate strategy to long-term, inclusive growth and leaders’ willingness to support this through corporate governance.
According to EY, there is a significant increase — from 66% to 84% — of board members and C-suite who say the COVID-19 pandemic increased expectations from consumers, employees, governments and broader society that companies will drive societal impact, environmental sustainability, and inclusive growth.
However, there’s also an increase – from 28% to 43% – in respondents identifying lack of commitment from the board to make decisions that fully integrate ESG factors that would lead to long-term value, EY noted.
- 55% of respondents say there are significant differences of opinion among leadership on how to balance short-term considerations with long-term investments and sustainable growth. That figure jumps to 68% of board chairs and non-executive board directors.
- 66% of leaders combined see the top two advantages to integrating ESG factors in their corporate strategy as first, long-term value through new ESG-driven products and services, and second, resilience to ESG risks.
- 83% of respondents said they would like mandatory reporting of ESG performance measures against global standards.
- 82% of respondents feel they have made significant progress in putting in place the controls and risk management systems needed to address material ESG risks.
- The top two challenges holding businesses back from delivering against ESG according to respondents are externally, near-term economic uncertainty (85%) and internally, lack of commitment from the board (43%).
Robust and innovative corporate governance approaches are critical for getting on the front foot with ESG-driven growth and this will be a process of evolution for many companies, said Andrew Hobbs, EY EMEIA Public Policy Leader.
The C-suite is closer to customer and other stakeholder needs while boards have a shareholder-focused outlook, he pointed out.
“There is real impetus now behind sustainability reporting mandates, crucial to a board’s accountability,” Hobbs observed. “Many markets are making significant moves to require ESG disclosures and drive up the value of reporting.”