Research: Boards Still Have an ESG Expertise Gap — But They’re Improving
By Tensie Whelan
Knowing the right questions to ask management on material environmental, social, and governance issues has become an important part of a board’s role. Five years ago, our research at NYU Stern Center for Sustainable Business found U.S. public boards were not fit for this purpose — very few had the background and credentials necessary to provide oversight of ESG topics such as climate, employee welfare, financial hygiene, and cybersecurity. Today, we find that while boards are still woefully underprepared in certain areas, there has been some important progress.
Having ESG expertise on boards is becoming increasingly imperative. New regulations in Europe, North America, and elsewhere are requiring more robust ESG reporting and disclosure for boards. The new SEC climate rule in the U.S., for example, requires board oversight and engagement on climate topics. In addition, there are a growing number of lawsuits against companies (more than 1,500 in the U.S. alone) that have contributed to climate change, engaged in greenwashing, mistreated their employees, have human rights abuses in their supply chains, and so on.
In 2018, our review of environmental, social, or governance-related credentials of all 1,188 board members on the Fortune 100 identified 29% of directors with one or more relevant ESG credentials. In 2023 (in research undertaken with assistance from NYU MBA candidate Ozair Arfi), we found that number jumped to 43% of the 1,161 board members now sitting on Fortune 100 boards. The growth came in environmental credentials, which nearly doubled, and governance credentials, which nearly tripled. Social credentials, which was by far the best represented category in 2018, remained close to flat in 2023 (at 253 members), while maintaining its place as the area with the most board experience. One hundred and eighty members had governance credentials and 153 had environmental credentials in 2023. Many more boards have installed ESG/sustainability committees, accelerating from 22 committees in 2018 to 89 in 2023.
Read the full Harvard Business Review article.
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Tensie Whelan is a Clinical Professor of Business and Society and Director of the Center for Sustainable Business.