New research reveals key trends that boards must take seriously to get fit for the future

New research from the University of Cambridge Institute for Sustainability Leadership (CISL) and global law firm DLA Piper has found over 20 key trends which boards must increase their focus on to help them prepare for the future amidst growing external pressures.

The research shows the growing emphasis on sustainability and Environmental Social Governance (ESG) concerns at board level. Stakeholders including investors, regulators and markets are increasing their scrutiny of boards on how they manage climate and nature-related risks and their impact on society.

“It’s essential that boards bridge the gap between their current practice and a new way of operating that aligns commercial success with a sustainable future, protecting the social and environmental systems on which they depend,” said Gillian Secrett, Research lead and Director of Leadership and Culture at CISL.

“Scanning the horizon and identifying so many of the key trends likely to impact boards, both now and in the future, provides an invaluable resource to help them better understand the wider landscape, anticipate future shifts, and therefore prepare strategically. Our findings speak to all boards who want to be ready for the many opportunities and challenges ahead so that they can thrive and contribute to long term well-being for people and planet in a rapidly changing world,” Gillian added.

The report surveyed multiple boards members and interviewed experts across the world. It also highlights the expanding role of the board, and scope of governance amidst the increase in cumulative external pressure, complexity and uncertainty; supply chain due diligence and its potential for impact globally; board dynamics and diversity; the move from voluntary to mandatory reporting – and what this means in terms of impact in an organisation. These new pressures are also creating demand for a wider set of skills and knowledge amongst board members to manage.

“The report demonstrates how ESG is now a core strategic issue for corporations. Boards are under greater pressure to consider a whole range of risks relating to climate change, impact litigation, governance and social issues,” said James Nicholls, Perth-based Corporate Partner, DLA Piper.

“More than ever, Boards must be equipped with the skills to navigate organisations through ever-growing compliance and risk exposures. This is where a comprehensive ESG strategy can really protect the long-term performance and value of companies. ESG strategy requires complete buy-in from the board level down,” James said.

The report found the traditional focus of boards on maximising returns for shareholders, prioritising short term gain, is increasingly at odds with a context of systemic challenges such as the global pandemic, geopolitical turmoil, and numerous climate catastrophes.

The report, points to potential implications of the trends and identifies a series of pivotal questions to use as a tool to help boards prepare strategically.

Key trends include:

• Boards face increasing expectations, responsibilities and pressures on time and capacity from a complex and volatile operating context.
• A rapidly changing legal environment and new responsibilities for businesses and their supply chains highlight the need to be aware and respond proactively across the systems in which they operate.
• Growing attention on board dynamics, diversity, independence and performance, emphasising the importance of investing in the right people, culture and board evaluation for the board to work at its best.
• Changing legal requirements regarding reporting, raising critical questions around board information requirements, strategy development, and decision-making.

The research has drawn out many practical implications for boards including:

• Boards would be advised to engage with and oversee sustainability risks and embrace new opportunities for the business.
• To make best use of limited time, boards should be focused on staying abreast of macro trends capable of impacting on the business and on social and environmental wellbeing.
• Boards should move away from a narrow focus on financial risks towards a greater acknowledgement of the interplay between financial viability and sustainability risks, and direct their energy towards mid and long term horizons as well as focusing on short term survival.
• Boards will require new capabilities, board structures and more representative and diverse membership to develop diversity of thought to aid sound decision making, unlock the full potential of the board and meet new governance standards.
• Boards should make sustainability disclosures and materiality assessments valuable tools for strategic decision-making rather than treat them purely as box-ticking exercises, recognising that that they may influence cost of capital, company valuation, mergers and acquisitions transactions and stakeholder relationships.
• Boards need to look beyond their own operations and consider the impact of company actions across the supply chain.