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Only 24% of board members from Asia Pacific said they had sufficient knowledge to activate and steer action on sustainability issues.
Although significant progress has been made on boardroom awareness and acceptance of the sustainability agenda, many still wrestle with integrating sustainability fully into their company strategy, according to a joint survey by Heidrick & Struggles, Boston Consulting Group, and the INSEAD Corporate Governance Centre.
Conducted in early 2023, 879 respondents from over 25 markets and 19 industries were surveyed, including Asia Pacific (Bangladesh, China, India, Japan, Malaysia, Pakistan, Singapore, Vietnam) and Oceania (Australia and New Zealand). It was revealed that respondents from the Asia Pacific and Oceania region discover, acknowledge, and respond more effectively towards embedding sustainability compared to their counterparts in the US and Europe.
A majority (91%) of respondents from the region somewhat or strongly agreed that their company has a clear understanding of how long-term trends impact the future value of their company.
But why there is still a gap between intentions and prioritisation of the environmental, social, and corporate governance (ESG) agenda? Capacity challenges and self-declared lack of expertise at the board level are cited by the report as two of the reasons.
The data showed that 60% of respondents from Asia Pacific and 79% of those from Oceania said their board had a clear understanding of the strategic opportunities and risks that sustainability presents. However, only 24% of board members from Asia Pacific and 16% from Oceania responded that they had sufficient knowledge to activate and steer action on sustainability issues.
These challenges are a global phenomenon, with consistent data shown across regions and sectors, despite the variance in traditions of corporate governance and responsibility.
Moreover, in Asia Pacific, more than one-third (37%) of respondents reported not having a dedicated head of sustainability or function in monitoring and advocating the company’s sustainability strategies.
On the other hand, the tension between the importance of sustainability, and the time and effort required to consistently give it attention was a persistent theme. Divergent perspectives from board members on strategic and executional considerations make it hard to witness sustainability strategies carried out in practice.
Half (50%) of Oceania and 62% of Asia Pacific respondents believe the complexity of the transformation to be the primary challenge in adhering to sustainability requirements.
Despite challenges in actioning on sustainability plans and objectives, data shows that boards are indeed spending more time on evaluating strategies and understanding the bigger picture. The majority of Asia Pacific (78%) and Oceania (91%) respondents dedicate a moderate to great deal of their time on evaluating the company’s long-term strategy risks and opportunities.
To fully integrate sustainability into strategy and board operations, though is complex, the report has outlined a clear path forward:
First, boards can further sharpen governance by, for example, reevaluating the makeup of the board, ensuring that deliberations take a long-term perspective, and improving transparency on issues such as director selection and evaluation.
Second, the board can carve out time for deep examination of how sustainability will impact the business, digging into issues such as the prospect of scarcity for some critical resources and the opportunity to build new ecosystems to create progress.
Third, directors can personally model strong leadership, including by making tough, consequential decisions and bridging the divide, where possible, between various stakeholders on contentious issues that range from balancing climate risk and energy needs to the role of stakeholder capitalism to businesses’ role in addressing societal issues.
Lead image / Shutterstock
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