In a corporate landscape increasingly shaped by environmental, social, and governance (ESG) considerations, the competency landscape of corporate boards is becoming increasingly important.
“How Competent is Your Board?”, a new report focused on Fortune 500 companies in Europe and the US, looks at the competency of corporate boards in terms of sustainability, focusing on roles, experience, and education.
The research was conducted by Competent Boards, “the original and premier creator of online environment, social, governance (ESG) and Climate education programs for board directors and senior business professionals,” in collaboration with the Copenhagen Business School.
The assessment involved an in-depth analysis of publicly available information on 390 boards of Fortune 500 European companies and 447 boards of Fortune 500 US companies in 2023. The study “provides a robust data set for understanding current trends and competencies in corporate sustainability.”
“A shocking majority of these companies are lagging in sustainability expertise,” the report’s authors write, emphasizing the urgent need for boards to enhance their competency in this crucial area.
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So, how urgent is this need?
According to the report, only 2% of the companies across Europe and the US have boards showing “high levels of sustainability competency.” These leaders demonstrate a commitment to navigating the complexities of the evolving corporate world.
On the other extreme, over 4% of boards in the US and Europe exhibit “no evidence at all of competence in this increasingly critical area of their companies’ business.” This signals a critical deficiency that could leave companies ill-equipped to address the growing demands for responsible and sustainable business practices.
The education score, used to measure directors’ sustainability expertise based on their education, found that this characteristic performed the worst for boards in both the US and Europe: Nine out of ten boards in both Europe and the US showed low competency in this area, with 55% of European boards and 36% of US boards performing below average.
The report also looked at directors’ past roles and found that 62% of US and 60% of European boards did worse than average, with just 1% of American boards performing “exceptionally.”
Interestingly, the report finds that, despite the stricter regulatory environment in Europe, American boards are “better equipped to deal with sustainability issues.” Around 84% of European boards have room for improvement. Among US boards, the report found this percentage to be 76%.
This highlights the need for a concerted effort in Europe to bridge the competency gap and align with global standards.
As the corporate world grapples with heightened scrutiny and evolving regulations, the Competent Boards report serves as a call to action. Boards must prioritize sustainability competencies to not only comply with regulations but to thrive in an era where responsible corporate governance is a strategic imperative.
The report’s insights should spark a reevaluation within boardrooms, prompting proactive measures to bridge the sustainability gap and ensure a resilient and sustainable future for Fortune 500 companies.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — Featured Photo Credit: Alex Shutin.
