Diligent & Fortune Director Roundtable Series: The Board & ESG
It is a complicated time to be a board member. ESG initiatives may be more important than ever as the impacts of climate change continue to intensify and younger generations demand more inclusive and environmentally conscious policies from their employers. At the same time, in the political sphere, there is intense pressure to back off of DEI initiatives, and new climate reporting regulations have stalled in the United States. Fortune gathered a group of board members and experts to discuss these issues, moderated by Geoff Colvin, Senior Editor-at-Large, Fortune.
Kicking off the conversation, Nithya Das, Chief Legal and Administrative Officer, Diligent, discussed a recent report, Sustainability in the Spotlight: The Balancing Act of ESG, by Diligent Institute in partnership with Spencer Stuart. Das described that Diligent and Spencer Stuart conducted a comprehensive study in March 2024, surveying 800 board members around the world. Das highlighted key findings from the report. “Over 96% of directors expect a continued or stronger focus on ESG over the next five years,” she told us. Despite widespread backlash against ESG, only 4% of companies have changed their ESG strategy as a result, she continued. Rather than abandoning initiatives that they see as essential to business survival, many have simply adjusted the language they use to discuss them, she said.
Kristina Wyatt, Chief Sustainability Officer, Deputy General Counsel, Persefoni, echoed these findings. Wyatt’s company helps organizations manage and account for carbon emissions via an SaaS platform. “Companies are really digging in and evaluating their climate risks and opportunities,” Wyatt noted. At the same time, she acknowledged a sense of stasis in climate reporting because of ongoing litigation around SEC rules and delayed California regulation SB 253 and SB 261. Despite these uncertainties, companies continue to prepare for reporting, focusing on issues material to their operations.
A major theme of the discussion was the integration of ESG into core business strategies. “The goal is not for ESG to sit over in a silo,” Wyatt emphasized. “It really represents material business risk and material business opportunity.” She urged companies to explain why ESG issues are important and how they materially impact their business. Das reinforced this point, advocating for a bottom-up and top-down approach to ESG strategy that engages a variety of stakeholders, from the board room to customers and employees. “As directors, one thing we can all do is keep pushing our management teams, as they bring forward ESG strategy, to show how it moves the needle on our business objectives,” she stated. Wyatt agreed, underscoring that management is typically focused on making goals for the next quarter. The board, she said, can contribute to ESG strategy by looking to the future and considering what risks might become material down the line.
In both sustainability and DEI, companies may not be stopping initiatives, but they are changing how they talk about their initiatives. Wyatt observed that companies are pulling back from explicit DEI goals because of external pressures, such as the recent Supreme Court decision on affirmative action. Similarly, Das noted that companies are continuing to set DEI goals while being more cautious about publicizing them.
As with sustainability, audience members on the call emphasized that DEI is critical to business success. One executive noted the often-cited merit-based hiring system. He made the point that those who do not diversify their pipeline cannot know that they truly hired the “best” candidate for the job, as they likely missed many candidates from underrepresented groups. Another leader on the call shared that her company is focused on representative hiring rather than DEI. For example, if 50% of a customer base is women, employees at that company should be 50% women.
In closing, Wyatt remarked on the relationship between doing the “right” thing and business strategy. She told us that some might try to say stakeholder capitalism is the enemy of profit, but in fact, stakeholder and shareholder capitalism go hand-in-hand. “There’s a very strong case to be made that if you’re focused on the things that your stakeholders care about and you’re doing the right thing, that will be in the best long-term interest of your shareholders,” she concluded. She encouraged everyone on the call to consider why ESG issues are important to their strategy, which will help integrate these initiatives into the business itself.
Wrapping up the conversation, Das invited executives to attend Diligent’s Elevate Leadership Conference, September 9-11, in Houston, TX. She noted that ESG will be covered, as well as AI, cybersecurity, financial ethics, and more.
