Company Director ESG Report
The international accounting firm PricewaterhouseCoopers (PwC) released the company director ESG report, which aims to survey director’s views on ESG and specific matters (such as board diversity, shareholder engagement).
This company director ESG report is part of PwC’s Annual Corporate Directors Survey, which involves more than 600 directors of listed companies.
Related Post: PwC Releases European ESG Fund Report
Corporate Directors’ Perspectives on ESG
The majority of directors said they are taking steps towards ESG disclosure, but only half of the respondents already understand the relationship between ESG and company’s business strategy. 51% of boards are prepared for mandatory ESG disclosure (25% in 2022), but only 54% understand ESG and company operations (57% in 2022).
PwC found that some directors prefer to use sustainability instead of ESG, reflecting their cautious attitude towards ESG. The impact of ESG topics is related to the company’s size, industry and other factors, and the risks and opportunities it generates are also different. External stakeholders (such as investors) have also expressed to the company that they do not want the company to overly consider ESG matters, which has affected the views of the respondents.
On specific ESG matters, board discussions on climate change have declined (down from 51% to 48%), with female directors more likely to be on ESG topics (67%) and male directors less concerned about ESG (51%).
PwC believes that companies should look for sustainability issues and discuss whether the responsibilities of board members are appropriately allocated. Board members should understand these risks and opportunities.
Corporate Directors’ Perspectives on Board Diversity
Most directors agree that diversity has a positive effect on the board, such as bringing more novel perspectives (93%) or improving board performance (82%), but more than half believe that these results come from outside requests. One-third of respondents believe that diversity results in less qualified candidates being placed on boards.
Many studies have linked board diversity to a company’s financial performance, and some institutional investors have also suggested that investees consider adding new members to the board. However, some directors’ concerns are valid. More than a third of new directors on the S&P 500 this year are making their first appearance.
Regarding attitudes toward board diversity, female directors are also more positive about this matter (100%) than male directors (73%). Data from the past two years shows that the differences between them have become greater.
PwC believes companies can increase their pool of potential board candidates and provide onboarding guidance for new directors. Companies may also revise their board succession plans to ensure increased board diversity in the future.
Corporate Directors’ Perspectives on Shareholder Engagement
54% directors communicated with shareholders in the last year, and 87% believed these communications were meaningful. Shareholders believe that active participation in corporate governance can influence the company’s business planning and improve financial performance and investment returns in the future. Shareholders can also understand the difficulties directors face in actual operations.
However, contrary to the traditional view that large companies have better governance effects, the proportion of shareholder participation in large companies (with annual revenue of more than US$1 billion) has decreased this year compared to last year (58%, compared with 75% last year). In terms of gender, male directors are more willing to communicate the specific situation of the company to shareholders (32%, compared with 15% of female directors).
PwC believes that board should understand the priorities of shareholders and be familiar with the history of previous interactions between shareholders and the company. The company can also designate a director as a communicator to be prepared for further communication with shareholders.