The ESG Review: Is boardroom sexual equality becoming ESG’s best by-product?

Progress towards some ESG goals can be phenomenally difficult to measure and, as often covered here, it can be tough to measure given the ongoing need for standardisation.

So consider this data point for a moment: corporate America has seen the proportion of female board members increase by 11 per cent since 2016.

There is still a long way to go to achieve a level of parity that is socially reflective, or meets specific equality targets set by organisations.

Yet as the Financial Times covered in detail this week, this is in no small part due to the ‘big three’ institutional investment firms beginning to turn up the heat on large US companies six years ago. In summarising a report by the US’s National Bureau of Economic Research, it outlined how large businesses had since increased the number of female board directors by a factor of 2.5.

That may sound more impressive than 11 per cent, such is the nature of statistics, and critics may rightly point out that severe imbalance remains.

But the FT’s article concludes that while this is just one area of progress, it is a clear-cut one with a clearly measurable marker of what has been achieved, and that is an ESG success story amidst swirling scepticism around how ESG action is reported, how investments are made and how large corporates frame their credentials.

It’s also, admittedly, an American view of that progress. Looking at the UK, almost two in five of people on boards are women now, according to an EY report, yet 91 per cent of them are in non-executive roles and just nine of the FTSE100 CEOs are female. That report painted a less positive picture - that there appears to be an alarming lack of progress of women within businesses into key executive roles, suggesting that the overall increase in the number of women on boards has been driven in the main by appointing female non-exec to comply with targets. In other words, gaming the (inadequate) ESG system.

And yet boardroom sexual equality is a topic from which there is nowhere to hide. Invariably, members of the board will be listed and detailed on the web site, and in the annual report, at the very least. Normally, with pictures. And as scrutiny grows over the detail behind the numbers, particularly in non-exec versus executive splits, so will the truth of progress be in plain sight. The numbers simply are what they are.

All of this points to UK businesses needing to continue to drive boardroom equality, to report meaningfully on their progress, and to be conscious that as well as reporting the data, they will likely need to explain what they are doing to continue to change. Which we already knew - but spotlighting the issue as a clear example of where ESG success can be pinpointed and attributed directly to corporate commitments can only be a positive thing. And again, there is a long, long way to go.

Demonstrating what difference that makes to stakeholder value, across other G factors let alone the E and S ones, is going to be much more complicated.

The ESG News Review is written by Steve Earl, a Partner at BOLDT.

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