Sustainability performance and business performance are increasingly closely linked. Companies and investors are increasingly aware of sustainability-related risks, across topics like issues like climate change, cybersecurity, and diversity and inclusion, and how they may influence the success of the business. Apart from risks, sustainability issues are increasingly associated with business opportunities that can enhance a brand strategy. Regulatory changes, consumer preference shifts or technological developments can all lead to changes to sustainability-linked impacts.  ESG issues tend to influence stakeholders’ opinions, which can directly impact a brand’s reputation. If not managed well, they can lead to risks that appear on financial statements.

With better insights into ever-evolving ESG risks and opportunities, boards with sustainability expertise make better business decisions. Moreover, companies can only start integrating issues like climate change, cybersecurity, and diversity and inclusion into the business once there is clear strategic direction from the top. And, in turn, this can only happen when Board members understand the interactions and dependencies between their business activities, their market, the environment, and society. ESG topics.

Reporting requirements now include board sustainability training

These are just a few reasons why board-level sustainability training is a logical step to bringing stronger, more comprehensive governance decisions to your business. Another one relates to compliance.

Governments are increasingly requiring companies to report on their board-level sustainability expertise. New reporting regulations and standards ask companies to disclose whether Board members have oversight of sustainability issues. Some specific disclosures focus on board-level training or development. Here are a few examples.

Global ISSB S1^[1] asks companies to report “how the [supervisory] body(s) or individual(s) determines whether appropriate skills and competencies are available or will be developed to oversee strategies designed to respond to sustainability-related risks and opportunities.”

Europe’s CSRD^[2] states: “The undertaking shall disclose the composition of the administrative, management and supervisory bodies, their roles and responsibilities and access to expertise and skills with regard to sustainability matters.​​”

In the UK Corporate Governance Code,^[3] requires companies to report their annual review process of the board’s annual performance. It states the performance review should recognise the strengths and weaknesses of the board, and “each director should engage with the process and take appropriate action when development needs have been identified.”

Many boards don’t have strong sustainability expertise yet

Sustainability training is relatively low hanging fruit for boards to both differentiate themselves from other companies and keep pace with the changes in the market and regulation. Yet surprisingly, many companies have not invested in developing stronger sustainability expertise at the top. Only minority (40%^[4]) of leading companies worldwide believe that their Board members have sustainability expertise.

But how do companies get there?

Board-level sustainability training can fill this gap. It provides the necessary context and long-term perspectives into why sustainability issues are globally important to businesses. It also helps boards understand their channels of impact, so they can better analyse how and why sustainability issues materialise as near-term risks or opportunities.

First, companies need to assess what knowledge is needed, and who needs to have this knowledge. Questions that could help you define sustainability training needs on your board include:

• How many individual board members possess thorough knowledge of specific sustainability topics and stakeholder perspectives affecting your business?
• Does your board have knowledge gaps related to sustainability issues relevant to your business?
• Does your board understand its legal obligations related to ESG due diligence and/or reporting and disclosure?
• Is there an organisational structure in place designed to inform the board on pressing sustainability issues?

While not every board member needs to be an expert on all sustainability issues, organisations should consider how they will integrate sustainability issues by structuring their board to meet this goal. This could take any range of approaches^[5]:

Developing a ESG governance structure can help you efficiently distribute roles and responsibilities for informing boards on ESG issues, and it can also help to prioritise your training wherever you find gaps.

What effective board sustainability training looks like

There is no one-size-fits-all approach to board training. Training providers recognise the time constraints and responsibilities of board members. A wide range of training opportunities are available from self-paced online courses to in-person workshops, or blended learning courses. Sustainability certifications are one approach that offers a visible token of achievement and opportunities to network with other professionals. These are available from a range of providers such as standards-setting organisations, higher education institutions, and non-profit organisations.

Whatever the form of training your board opts for, it’s worth taking into consideration how well training is customised to your needs. It should be:

• Aligned to industry and regions of operation.
• Focused on the needs of your board, such as climate risk (TCFD reporting) or biodiversity (TFND) framework training.
• Rigorous enough for boards to understand their legal obligations for complying with CSRD or ISSB.
• Meaningful enough for boards to understand the links between sustainability and value creation.

As demand grows for sustainability oversight from boards, training is a logical solution for levelling up board members’ knowledge and skills. More than just a box-ticking exercise for reporting compliance, the long-term benefits of board sustainability skills and expertise can lead to stronger business performance and differentiation.

We have experts at Simply Sustainable who can talk you through the different levels of training. Our team has a vast amount of learning and development experience as trusted partners to our clients. Please get in touch here.

^[1] https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards-issb/english/2023/issued/part-a/issb-2023-a-ifrs-s1-general-requirements-for-disclosure-of-sustainability-related-financial-information.pdf
^[2] https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=OJ%3AL_202302772
^[3] https://media.frc.org.uk/documents/UK_Corporate_Governance_Code_2024_ofM100g.pdf
^[4] https://www.morganstanley.com/ideas/corporate-sustainability-opportunities-challenges
^[5] https://www.linkedin.com/posts/andreasrasche_sustainability-esg-activity-7184471824418684928-BydV?utm_source=share&utm_medium=member_desktop