The key findings of the research are the following: 

The report confirms that ESG risk and strategy are becoming increasingly important, and boards must incorporate them into the business’s overall strategy.

For this reason, companies are also formalising their oversight, which is, for 58 per cent of the respondent, at the board level (while, in 2021, it was 46 per cent).

However, 47 per cent of companies do not have key performance indicators (KPIs) to measure progress on ESG targets. Among those that do, six in ten find it difficult to apply KPIs to ESG goals, mainly due to the level of awareness and understanding of current and upcoming legislation.

Moreover, the research finds that 79 per cent of companies have not currently integrated ESG metrics into the compensation of their executive directors, even if  52 per cent agree it should be for executive directors and 56 per cent for senior management. Respondents expressed optimism that linking ESG KPIs to compensation would lead to change.

This is a general trend: a recent study by The Conference Board in the United States, published in November, found that large US companies are increasingly linking executive compensation to some form of ESG performance, with the share growing from 66 per cent in 2020 to 73 per cent in 2021.

The research also found that 63 per cent of respondents had not attended ESG training in the past year, although they recognised its importance. Seventy-five per cent said that all board members should share ESG skills. According to the report, organisations are employing a wide variety of methods to increase their board members’ skills in ESG: the most common tactic is to include ESG training in overall director training, and 10 per cent of respondents indicated they would be conducting an ESG board evaluation and would be hiring directors with ESG skills, respectively.

Respondents agreed that ESG goals and long-term strategy are heading toward greater alignment, but more time, resources, and guidance are needed to ensure directors are well-equipped to oversee the function effectively.

Caroline Spillane, the Institute of Directors in Ireland CEO, commented: “Embracing ESG is not just about targets and legislation requirements, but also values. Setting realistic and accurate KPIs to measure ESG successes or failures will lead to real traction and change in reaching ESG targets.”