Almost half (48.57%) of UK corporate boards expect a continued or stronger focus on ESG over the next five years, with diversity, equity and inclusion (DEI) and climate change topping the list of priorities.
The Sustainability in the Spotlight 2024 report from the Diligent Institute and Spencer Stuart, revealed how directors are looking for more specific data and insights to balance the risks and opportunities surrounding ESG more effectively.
Despite sustainability in the corporate world being defined by flux, very few companies are backing away from their ESG ambitions, with 36% of UK companies aspiring to be seen as sustainability leaders. The largest obstacle to ESG is actually internal, with almost 23% of respondents naming competing business or strategic interests within their own organisations as the number one barrier to executing on an ESG strategy.
The report collated responses from over 800 global board members, including 70 UK boards.
Dottie Schindlinger, executive director of Diligent Institute, said: “The changing political climate and increased scrutiny of the UK government’s sustainability action plan will no doubt affect how organisations approach their own progress against ESG metrics. Fortunately, our research revealed sustainability remains high on the business agenda, but board members will need to be careful not to let competing business interests steer them off course. Not only will the risk of not meeting ESG compliance requirements continue to grow, but there are also new business opportunities for those who integrate ESG seamlessly into their strategies.
“Overall, these latest insights are encouraging and show UK businesses are doubling down on their efforts for more transparent and thorough disclosures. With more regulation on the horizon, boards will need a holistic view of their ESG data to gain clarity on their progress towards sustainability goals and mitigating risks.”
Public backlash
For most UK boards, public backlash around ESG is not a major concern. Only 7% of respondents cite ESG backlash as a major obstacle, and, when asked about the effects of public backlash around ESG, 47% said their organisations have continued with their current strategies. Additionally, 19% said their organisations changed the terminology or level of publicity around their ESG goals, without changing course.
UK boards also noted an understanding of the organisational risk in not pursuing ESG. While 7% of directors said they thought about ESG more in terms of opportunities than risks, 68.57% of respondents said their organisations are enhancing ESG disclosures, reports and filings. Further, 41% are focused on keeping up with evolving voluntary standards.
Meanwhile, on a global scale, boards of European companies and companies in the Asia-Pacific region companies are more likely than those in North America to be taking action in light of ESG regulations, at 96% and 94% versus 84%. ESG priority skews to the high side of board concerns in APAC (51%) and Europe (46%), and, among North America respondents, only 22% named ESG as a high-level concern versus 52% who named it a mid-level concern.
“Our insights suggest despite some headwinds, companies across the globe are continuing to strengthen their sustainability commitments, as the bar steadily rises for compliance and performance,” said Jason Baumgarten, head of Spencer Stuart’s global board and CEO practice.
“Board directors are ensuring their organisation stays the course in calibrating and achieving sustainability goals, and their stewardship will play an outsized role in striking the right balance between risk mitigation and growth opportunities going forward.”
