A survey recently conducted by PwC has found that less than 50% of American corporate boards include environmental, social and governance (ESG) investing principles in their agendas. This drop in ESG as an investing framework has been linked to ambiguity, with less than 10% of board members surveyed believing that sustainability and ESG mean the same thing.
PwC surveyed 520 directors of public companies based in the United States. The survey indicated that 69% of the directors were board members of companies with more than $1 billion in revenue, with 58% of them having been board members for five years or longer. In addition, 47% of those surveyed revealed that issues to do with ESG were a part of their regular board meeting agendas. This is a decrease from the 52% recorded in last year’s survey and 55% from the 2022 survey.
The survey also reported on the increasingly fraught and complex context around ESG and its use in the business world, with 66% of those surveyed acknowledging that ESG meant different things to different people. Only 42% of directors believed that boards fully understood what ESG meant, with the findings showing that this problem was more common in the boards of smaller organizations. Smaller companies also observed less of an association between the performance of their companies and ESG, with 15% of directors from these companies revealing that ESG had a clear influence on their bottom lines. This is in comparison to 32% of directors from large companies.
Additionally, more than 50% of directors revealed that their boards were sufficiently prepared to manage ESG disclosures.
Most respondents believe that ESG is becoming a distraction from nosiness operations, with concerns mainly centering on social issues and policy instead of driving business in the current landscape. More than one-third of respondents admitted that they believed ESG was no longer valuable and had become a charged term.
Despite this, many issues related to ESG continue to receive attention from boards. The survey noted that 95% of responses showed that talent management, which includes DEI practices, and data security, were discussed at least once in the last 12 months. Survey results also show that climate change and carbon emissions were discussed by 60% and 67% of boards in the same period, respectively.
In its report, PwC acknowledged the importance of sustainability as a framework, explaining that directors played an important role in guiding management to allocate attention and resources to issues dealing with sustainability. It adds that progressive companies recognized the link between allocating resources to sustainability initiatives and achieving success in the long-term.
As more clarity around ESG principles and practices grows, more companies are likely to join the likes of Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) in espousing these principles.
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