A new report has found that nearly half of UK boards anticipate a continued or strengthened focus on environmental, social, and governance (ESG) matters over the next five years.

Sustainability in the Spotlight 2024 found that diversity, equity, and inclusion (DEI) and climate change rank highest among corporate priorities, according to the report by Diligent and Spencer Stuart.

Further, the report highlights the challenges faced by companies in their sustainability efforts due to new greenwashing and sustainability standards, increased reporting requirements, and heightened public scrutiny.

Despite these obstacles, very few organisations are stepping back from their ESG goals, even though achieving them has become more challenging.

For the report, Diligent and Spencer Stuart surveyed over 800 global board members, including representatives from 70 UK boards. Only 7% of UK-based respondents cited ‘backlash’ against ESG as a major obstacle. When asked about the impact of public scrutiny, 47% stated that their organisations remain committed to their existing ESG strategies.

The study found that 36% of UK companies aspire to be recognised as sustainability leaders. However, there are concerns that sustainability reporting has unintentionally burdened organisations, and warnings about ‘legislation lethargy’ persist.

Furthermore, nearly one in five firms adjusted the terminology or level of publicity around their ESG goals without altering the underlying strategy due to increased public pressure.

The study also revealed that fewer than one in ten directors perceive ESG primarily as an opportunity rather than a risk for their organisations.

The main obstacle to ESG progress is internal buy-in, with competing business interests and strategic concerns being significant barriers. These findings align with previous research emphasising the need for a ‘mindset shift’ among directors to effectively translate green business opportunities into action.

“Corporate boards today recognise both the risk of ignoring ESG initiatives and the reward that comes from standing strong in upholding them,” said Dottie Schindlinger, executive director of the Diligent Institute.

She added: “The data shows us that while ESG oversight has become an established board function, directors still need more clarity and insights to respond to regulatory demands and become better stewards of their organisations’ ESG efforts.”

More broadly, the study found that European and Asia-Pacific boards remain more engaged with ESG than their US counterparts.

For example, boards of companies in Europe and the Asia-Pacific region were found to be more likely than those in North America to be taking action in response to ESG regulations.

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ESG is among the top priorities for 51% of the Asia-Pacific board members quizzed and almost half of those in Europe. Yet among North America respondents, only 22% named ESG as a high-level concern compared to 52% who defined it as mid-level issue for the board.

“Our insights suggest that despite some headwinds, companies across the globe are continuing to strengthen their sustainability commitments, as the bar steadily rises for compliance and performance,” said Jason Baumgarten, head of Spencer Stuart’s global board and CEO practice.

He concluded: “Board directors are ensuring their organisation stays the course in calibrating and achieving sustainability goals, and their stewardship will play an outsized role in striking the right balance between risk mitigation and growth opportunities going forward.”