The drive for sustainability is remaking companies, supply chains, and economies. This profound business transformation comes as companies are also grappling with the potential impacts of generative AI, new regulations, and more. So how are boards of directors meeting the sustainability challenge?
BCG, INSEAD, and Heidrick & Struggles have teamed up to find out. We cast a wide net with a global survey reaching 879 respondents in 19 industries and a series of roundtables involving more than 200 directors. We found that boards are adapting, making changes to how they approach their own composition, their governance and process considerations, and the metrics they track. But they also continue to wrestle with challenges, most notably how to integrate sustainability fully into company strategy. Although the majority of respondents say that sustainability considerations should be fully integrated into business strategy, only a minority report that is the case today.
How Sustainability Is Reshaping the Work of Directors
There is an undeniable shift today in the expectations for the role of business in society. Trust in government has ebbed—and people are increasingly looking to business to lead the way in addressing major societal challenges. At the same time, regulations, including the Corporate Sustainability Reporting Directive in Europe and the universal proxy introduced by the Securities and Exchange Commission in the US are upping requirements around transparency and accountability.
Yet despite greater attention to meeting societal expectations, most boards do not feel financial pressure to act on sustainability issues. The majority of respondents—68%—report that sustainability is having no effect or only a slight impact on the company’s financial performance today.
There are, however, other factors driving board action. Just over half of the directors in our survey cite increasing legislative and regulatory requirements as a key driver of company efforts to address sustainability with a similar share saying they are acting because it’s the right thing to do. (See Exhibit 1.)