Five years ago, our research at NYU Stern Center for Sustainable Business found US public boards not fit for purpose – very few directors had the background and credentials necessary to provide oversight on material ESG topics such as climate, employee welfare, good financial hygiene, and cybersecurity. In 2023 we find that there has been some important progress, while certain areas remain woefully lacking.

Following our initial review of ESG-related credentials for all 1188 board members of Fortune 100 companies in 2018, CSB employed the same methodology to assess the 1161 Fortune 100 board members in 2023.

Key findings include:

• Doubling from 21% to 43% of total board members with one or more relevant ESG credential
• ESG board committees in the Fortune 100 increased from 22 to 89
• The percentage of board members with environmental and governance credentials more than doubled (from 6% for both in 2018 to 13% and 15% respectively in 2023)
• Diversity, equity and inclusion continued to be the most significant area of ESG board expertise and also grew from 80 to 108 board members
• While renewable energy and climate change saw significant increases, an unchanged 2 board members have water-related credentials

ESG Credentials by Category

Environment (13%)

Board members with environment-related credentials more than doubled since 2018 with significant growth in sustainable business generally, from 10 to 49 board members. Renewable energy expertise also increased from 14 to 43 board members, and climate change from 3 to 22 board members. However water, a material issue for several Fortune 100 companies in the manufacturing, retail, packaging, and food and beverage space remained constant at just 2 board members with credentials.

Social (21%)

Social-related credentials remained the category with the most board member expertise, with workforce diversity increasing from 60 to 108 board members with credentials but remained flat at 21% of directors. Some sub-categories decreased in representation, such as health care, civil and human rights, and labor relations.

Governance (15%)

Governance credentials grew substantially from just 6% of board members in 2018 to 15% in 2023. A large area of growth was accounting oversight, which increased from 31 to 71 board members. Another category, which CSB identified as a critical gap in expertise in 2018, was cybersecurity, which has since grown from 8 board members with credentials to 50. Risk grew from 5 to 11 board members with credentials, but remains critically underrepresented given its material impact on business.

Principles of Good Sustainability Board Governance

As ESG issues are increasingly considered as essential for optimal financial performance, companies can ensure they are equipped with the necessary expertise by:

• Recruiting directors with relevant ESG experience
• Training board members in material ESG issues for the sector
• Including ESG issues in the various committees (ESG metrics in remuneration, ESG credentials in nominating, ESG risk in risk and audit)
• Setting up an ESG/sustainability committee to oversee the ESG risks and opportunities and how they are embedded in business strategy
• Requiring executives to provide audited reports on ESG KPIs and the financial impact of ESG investments using tools like CSB's Return on Sustainable Investment (ROSI) Methodology, which allows companies to measure intangible metrics including risk avoidance, employee retention, and operational efficiency

To learn more about tactics firms can adopt, read the full report.