This post is a guest-authored commentary piece discussing the findings of  Diligent Institute and Spencer Stuart’s 2023 survey and report, Sustainability in the Spotlight: Has ESG lost momentum in the boardroom? This is the first blog in a series of global commentary pieces analyzing how the results of the survey compare to practices and attitudes in specific regions. 

On June 29, 2023, Diligent Institute in collaboration with Spencer Stuart published a report titled Sustainability in the Spotlight: Has ‘ESG’ lost momentum in the boardroom? The report is based on a  survey of 992 Board members around the world.  The majority of these responses, however, come from the United States, Canada, the European Union, and the United Kingdom. 

Further, Diligent Institute has collaborated with the Institute of Directors, India, to better understand board strategy and oversight of ESG in the Indian boardrooms. 

What has the global study primarily revealed?

 Board members in the study have a practical outlook; and mostly view ESG as both, a ‘risk’ and an ‘opportunity’. The study has revealed that there is a significant increase in the importance given to ESG, where more than 50% of directors believe that ESG-related metrics should be incorporated into the security valuation of companies.  

Most directors indicated that they need more clarity on what ESG means to their organizations, especially on the environmental front, where they need more guidance to effectively link overall organizational strategy with ESG and sustainability goals. With regard to ESG integration, Boards have enhanced their focus, particularly with respect to ESG disclosures. European Boards are more actively reporting on ESG, compared to Boards in the US.  

Identifying ESG responsibilities

As ESG has come to be a vital part of investment decision-making, it has become even more important for companies to identify, assign or make someone responsible for ESG-related initiatives. Organizations have been trying to structurally assign executives with ESG-related responsibilities.  

Nearly 27% of boards have formed an ESG or a Sustainability Committee, which reflects that Boards are undertaking in-depth discussions on ESG. At the same time, nearly 50% of respondents continue to place the responsibility of ESG oversight on the full board.  

The oversight responsibility for Social and Governance aspects has been delegated to the Nomination and Remuneration Committees for the most part. Yet, more than half of respondent directors feel the need to have the complete board’s attention on ESG issues. This reflects the growing interest of Directors in wanting to make use of ESG opportunities while being cautious of its risks. Upon closer observation, we discover that in the last year, directors are talking more and more about these issues.

Mapping ESG: India and the world 

In India, regulators have been very proactive with respect to ESG. In 2022, Business Responsibility Reporting (BRR) was transformed into Business Responsibility Sustainability Reporting (BRSR), a framework designed based on multiple international sustainability reporting frameworks.  

According to our initial results from the similar study we are conducting with Diligent Institute, about 51.19% of boards are working to enhance ESG disclosures, 33.33% of boards have already started training programs for Directors, while 34% of boards are installing monitoring solutions for ESG oversight and visibility. With the global study as well, more than half (53%) are enhancing their current ESG disclosures, 29% are engaging in educational programs and 38% are looking to install ESG monitoring solutions. This shows that India is in line with the current global ESG integration trends.  

ESG progress: the next decade

According to the global study , the majority of directors think that ESG strategy and integration will persist within organizations over the next ten years. Nearly 33% of board members believe that there will be a stronger concerted focus on ESG initiatives, including measurable differences and corporate support, over the next five years, while around 20% of board members believe that the link between ESG initiatives and their impact on business will grow stronger.  

Despite temporary variations in popularity, it is anticipated that ESG will continue to gain momentum in the long run, across the world.