Why sustainability plays a key role in shaping future boardrooms

The vast majority (95%) of leaders surveyed by Competent Boards before GreenBiz 23 in Arizona agree that sustainability plays an important or very important role in shaping successful future boardrooms.

Board directors are under scrutiny and pressure like never before — and it is time to start forming the future boardroom of choice. The Future Boardroom initiative discussed during Davos meetings last month is gaining buzz worldwide at leadership tables. The initiative will gather insight from a wide range of global experts that will help board directors and senior business leaders plan for and navigate the transitions that will shape the boardrooms of today and tomorrow. Key issues include:

• How will this transition impact directors, companies and society as a whole?
• What or who will accelerate the changes?
• What are the best- and worst-case what-if scenarios?
• How can we enable leaders to make the best and most innovative decisions?

The Future Boardroom initiative is designed to bring together the leaders of today and tomorrow from all over the world to pool their knowledge and insights for a common goal — and share it with all leaders who can benefit.

As part of that, I am delighted to be in Scottsdale, AZ, this week for #Greenbiz23 alongside more than 1,600 sustainable business leaders. Topics on the table will include mapping out a business path to net zero, how to advance the circular economy, promoting social justice, building resilient supply chains and promoting biodiversity and nature-positive business solutions. 

Joining me for a fascinating panel discussion on Sustainability in the Future Boardroom on February 16 are some extraordinary leaders that can help make the transition happen. 

We will discuss how new regulations and stakeholder demands will likely change the balance of power in boardrooms. That means we have an unprecedented opportunity to shape this board transition and welcome a new, fresh, forward-thinking generation around the table. 

To gain further insights into this, we ran a series of polling questions on our Competent Boards LinkedIn page, and the results have been fascinating.

1) How important is sustainability knowledge as a key consideration in the selection of new board members?

• Not important = 1%
• Important = 15%
• Very important = 80%
• Unsure = 4%

2) What drives sustainable change in the boardroom? 

• Investor demand = 66%
• Customer demand = 15%
• Employee demand = 2%
• Regulations = 17%

3) How does “today's” boardroom get insight to provide oversight on ESG?

• Ask the CSO to join meetings = 17%
• Pursue ESG training = 44%
• Appoint BoDs with skillset = 29%
• Unsure = 10%

4) Do you see new competencies (e.g. climate, biodiversity, DEI, human rights, cyber security, etc.) as necessary for The Future Boardroom? 

• Yes = 100%
• No = 0%
• Maybe = 0%

5) Will proactive addressing of ESG factors by board members be an asset for a company to out-pace competition and add value creation?

• Yes = 95%
• No = 2%
• Maybe = 3%

We will be unpacking the data this week at GreenBiz23, as well as polling the many attendees there. 

For now, with GreenBiz 23 well underway, the data clearly shows that knowledge of and insights into environmental, social and governance (ESG) risks and opportunities are not just a nice-to-have; they are a must-have for future board directors. Boards will therefore need to set criteria around education and experience in these areas and reflect their type and depth of competencies in the skills matrices. 

The education programs we provide at Competent Boards are designed precisely to address this need, as our alumni have told us. According to Peggie Pelosi, we have “a curriculum that provides corporate board members and advisors the insight, awareness and competencies to effectively identify and oversee the associated business risks and opportunities.” John McMillin, who is on the board at Whole Earth Brands, concurs: “As a board member, I can now better identify and act on the most material environmental, social and governance aspects of the business. More than anything, this program helps me ask the right questions.”

Our poll respondents were almost unanimous on another area. Proactively addressing ESG risks and opportunities now will help their companies stay ahead of the competition and enhance their value creation. 

Despite that, today’s boardrooms are uncertain as to how they should gain those vital insights. ESG training, tapping into the Chief Sustainability Officer’s expertise and appointing board directors with the necessary skill set are not alternatives but are all important avenues. 

It was the one in 10 respondents who said they did not know how “today's” boardroom gets insight to provide oversight on ESG, that made me reflect on the strategic direction of many companies and the board oversight. Without a board with access to sustainability knowledge and confidence to underpin their decision-making, companies often lose track of their compass and then get severely buffeted by geopolitical, economic and climate-related storms.

Based on nearly 50 responses, investor demands were the biggest driver of sustainable change in boardrooms for two-thirds of our respondents. However, it would be interesting to ask this question again in a year’s time when the growing mountain of ESG, climate and biodiversity regulations, not least from the SEC. International Sustainability Standards Board (ISSB), Taskforce for Nature-Related Financial Disclosures (TNFD), and the Corporate Sustainability Reporting Directive (CSRD) have all actively kicked in. Respondents also noted stakeholder demands and board members’ fiduciary duty having an impact here.

One of our respondents also noted here: “In the future, it will be losses and litigation charges related to climate disasters and loss of customer base and increase in carbon in-country taxes and cross border taxes. Organisations that don’t start addressing this now are unlikely to be going concerns and will not last beyond current generations.”

Shaping the future boardrooms of choice, not by chance, around the world will be a mighty challenge for all companies. Are you ready to help us shape the future? Sign up today!