More than half of the world’s largest companies now have board-level oversight of social issues, a new study has revealed. The survey found that 55% of S&P 500 company boards have ‘explicit oversight responsibilities’ of social issues relevant to the operation of the business – such as human rights and workplace standards. However, board oversight of environmental issues is less common, with only a third (33%) reporting structures and policies in that area.
About a third (34%) of the companies with board level oversight of social and/or environmental issues have assigned that responsibility to the board’s corporate governance and nominating committee, with a similar proportion (32%) giving it to a public affairs or sustainability committee. But in the remaining third, the board as a whole has taken on responsibility. The study, commissioned by the US-based Investor Responsibility Research Center Institute (IRRCI), shows that businesses in the paper, forestry, healthcare, oil and gas, and utility sectors are most likely to have board-level oversight of social and environmental issues, mainly because they are subject to more widespread scrutiny on such issues.
While 80% or more of companies in each of these industries had board oversight, the retail sector, with only 34%, was pinpointed as being a laggard, despite the amount of attention it receives on human rights and labour standards. Technology hardware companies (33%) were also criticised for not giving enough board attention to social and environmental issues. Despite failings in some sectors, Jon Lukomnik, executive director of the IRRCI, said the ‘sizeable percentage’ of S&P 500 companies that have elevated environmental and social issues to board level ‘reflects the growing understanding among directors and executives of the financial risks and opportunities of sustainability’.
Bigger companies were found to be more likely to have board oversight of social and environmental issues, with the top 20% largest by revenue more than three times more likely to have such oversight than those in the bottom fifth. Most companies (81%) with board oversight had established independence standards to guide their deliberations on social and environmental issues, while 92% had provision to hire outside advisors and experts to help them if necessary.
Currently the PRI are managing a range of engagements aligned with many of these themes. Current engagements include, human rights in the extractives sector, labour standards in the agricultural supply chain and sustainable palm oil. A full list of PRI led engagements is available online.