ESG Matters: Board-level Environmental, Social and Governance Committees Now Established by the Majority of FTSE100 Firms

ESG (Environmental, Social and Governance) continues its ascendancy in terms of priority within big business, yet even within the FTSE 100, differences remain between industries
ESG Matters: Board-level Environmental, Social and Governance Committees Now Established by the Majority of FTSE100 Firms
Like

Source: Unsplash

FTSE100 companies are making ESG committees a priority

New research has found that the vast majority of FTSE100 companies now have ESG committees at board level. Research by Mattison Public Relations, conducted in July, discovered that more than half (54%) of FTSE100 firms now operate an ESG committee at board level. Maria Hughes, Director at Mattison Public Relations, said: “FTSE 100 companies are taking big steps towards addressing their responsibilities on ESG. UK plc is showing its commitment to tackling climate change and reducing its impact on the broader environment. If you are a FTSE100 company without an ESG committee at board level, then you are now in a shrinking minority.”[i]

However, sector differences emerge

Whilst the overall data is positive, Mattison’s study also reveals broad differences between industry sectors. For example, just 13% of companies in the financial services sector, excluding banks (e.g. insurers, asset managers, and retail investment platforms), have ESG committees at board level. Yet the mining, oil, and gas sector sees 100% of FTSE100 companies operating these committees. It suggests that those in heavily polluting industries appear more eager to show visible commitment to ESG, yet arguably it may not be especially effective, given how these industries remain at the fore for criticism regarding their environmental impact.

However, as Maria Hughes argues, those in less traditionally polluting sectors should be considering introducing ESG committees:

"Sectors with low environmental impacts and no ESG committee are missing an easy opportunity to improve their ESG credentials."[ii]

Further, proposed changes from The Financial Reporting Council (FRC) in July this year could see ESG pushed up the agenda for corporations, making it even more important that businesses address it now. Proposed changes to the corporate governance code centre around providing a stronger framework for reporting on the effectiveness of internal controls and board responsibilities for expanded sustainability and ESG reporting[iii]. The changes could come in as early as 2024.

Why ESG matters

ESG is an increasingly important aspect of business operations and is also of growing importance to consumers. Research by Deloitte, looking at the consumer industry, found that “almost six in 10 consumers have changed their behaviours to help address climate change. In March, 52% of consumers reported making a sustainability-based purchase within the previous four weeks. Thirty-four per cent of those paid significantly more than for an alternative.”[iv]

The research carried out in April this year saw 150 executives at consumer industry companies spanning automotive, consumer products, retail, and transportation, hospitality, and services businesses, surveyed. It also found that “only 3% of consumer companies say they produce sustainability data that is as accurate and verifiable as their financial data.”[v]

A further recent study, this time by EY, “the Long-Term Value and Corporate Governance Survey”, found that from their 200 surveyed directors and senior managers at large businesses, 4 in 10 say that they don’t get the support they would like from their boardrooms in taking a holistic and ambitious approach to ESG challenges. The study also highlighted the growing interest in addressing environmental impacts. More than four-fifths (84%) said that their stakeholders are increasingly expecting their firms to be a force for good in terms of environmental and social sustainability, up from 66% just last year.

References

[i] Majority of FTSE100 firms have set up board-level ESG committees, research finds - edie

[ii] Financial services lags behind in FTSE 100 on ESG committees (investmentweek.co.uk)

[iii] UK Corporate Governance Changes Proposed – ESG Investor

[iv] Driving Accountable Sustainability | Deloitte Insights

[v] Ibid

 

Please sign in or register for FREE

If you are a registered user on Zero Carbon Academy, please sign in