Most publicly-held U.S. companies lack “the basic foundations of an enterprise-wide sustainability program, including a clear mission statement, a dedicated functional department, and a system to assess whether sustainability activities help financial performance,” according to a new report by The Conference Board, a nonprofit business research and membership organization.
The report – Sustainability in the Boardroom – is based on a survey of corporate secretaries at 50 U.S. corporations.
Citing multiple “flaws” in how corporate boards oversee their social and environmental initiatives, the report found that even though corporations lack the structural framework to enable proper director oversight of sustainability programs, they rarely consult outside expertise. At 89.2 percent of the companies surveyed, directors continue to rely on reports by senior executives for information on social and environmental initiatives.
“Directors almost never use additional sources (including peer-company benchmarks, environmental reports, director education programs, and consultants) that would help them critically verify and analyze any internally produced information on these matters,” according to the report.
The report found that 61.9 percent of surveyed companies do not use any metrics to link executive pay and accomplishments in the social or environmental sphere; 76.5 percent do not employ any of the widely endorsed standards existing today in many areas of social and environmental concern; and 42.9 percent do not include any information on metrics in their corporate disclosure.
The Conference Board said it has been documenting governance practices for several years and “regularly found that only a small number of companies consistently elevate sustainability issues to the strategic discussions that take place at the board level.”
“The environmental catastrophe that has been unfolding in the last few weeks in the Gulf of Mexico is indicative of how closely intertwined sustainability and corporate strategy really are,” said Matteo Tonello, director of corporate governance research at The Conference Board Governance Center and author of the report.
Tonello said rising activism may make the difference in governance practices in the near future as more directors are “feeling pressure from regulatory bodies, enforcement agencies, and activist investors.” Approximately 57 percent of the surveyed companies reported having received an explicit request from an activist investor.