How to maximize your board’s engagement in sustainability governance
Corporate boards often lack sufficient climate expertise; here are 3 ways to establish effective sustainability governance. Read More

This is part of a series about how companies can integrate sustainability into their core business strategies. The previous articles in the series describe how to assess your company’s sustainability strategy, identify material ESG factors and stakeholders, develop your company’s business strategy, make the internal business case for sustainability investment, and cultivate a culture of sustainability. This article describes how to embed sustainability into a company’s governance structures.
A critical enabler of good sustainability governance is an engaged and active board. Too often, board members do not have the experience to understand that sustainability is essential to effective business strategy and value creation. Other challenges include the lack of a formal board committee on the topic, a lack of expertise in financially material sustainability topics, and an exclusive focus on ESG compliance and reporting rather than business strategy.
In 2018, NYU Stern Center for Sustainable Business (CSB) analyzed the individual ESG-related credentials of 1,188 Fortune 100 board directors, based on regulatory filings and company bios with the assumption that credentials deemed important by the company would be included. At the time, we found less than one-third (29 percent) had relevant ESG expertise listed, with only 6 percent mentioning environmental credentials and 6 percent listing governance credentials. In a world where climate change is directly affecting many industries, only three board members had climate credentials.
Fortunately, our update to the research in 2023 found that 43 percent of board members had relevant ESG expertise and 89 of the Fortune 100 companies had ESG/sustainability committees, up from 22 in 2018. Board members with climate expertise increased from three individuals in 2018 to 22 in 2023 (still not a great showing) — however, some industries with significant climate risks had no board members with climate expertise.
For example, utilities, which have huge environmental risks ranging from extreme weather destroying their infrastructure to regulatory frameworks calling for decarbonization, have zero board members with environmental credentials. Transportation, which faces significant environmental challenges including climate change resiliency, energy use and the changing regulatory environment on carbon, had only five board members out of 52 with environmental credentials. On the positive side, that is an increase from 2018, when only one board member out of 66 had environmental credentials.
Based on our research and engagement with companies, we recommend that each board incorporate the following components of sustainability governance:
Board credentials
All board members should be trained in the material ESG issues for their company. Several organizations and entities, including the National Association of Corporate Directors (NACD), Competent Boards and universities such as NYU Stern, offer such board training. Ideally, two to three board members should have direct expertise in the most material topics. For example, the board of a food company must understand the challenges related to water, climate and labor in their supply chains; understand the upside related to consumer demand for sustainable food products; and ideally have a board member with high-level expertise in sustainable/regenerative agriculture. A strong board is trained to understand the risks and the opportunities created by material sustainability issues and how they contribute to strategy and value creation. The board should also understand new and emerging regulatory requirements such as the European Union’s Corporate Sustainability Reporting Directive (CSR-D) and standards from the International Sustainability Standards Board (ISSB) along with their relevance for the company.
Board committees
Sustainability should have its own dedicated committee and be incorporated across the other board committees in the following ways:
- The nominating committee works with executive leadership to provide ESG training to the broader board and recruit ESG-credentialed board members.
- The compensation committee incorporates ESG into executive compensation plans (many companies apply 20 percent of compensation to meeting ESG targets).
- The audit and risk committee delivers ESG reporting and compliance for board review.
- The sustainability committee explores how managing for and investing in material ESG issues can support business strategy and reduce risk. It looks for ways to create opportunities in areas such as margin improvements, sales and marketing, and employee retention. The committee should ask for supporting company data and review sustainability-related capital expenditure requirements to support them through approval processes.
Engagement with executive leadership
The sustainability committee, together with the board chair, must work closely with the CEO, chief sustainability officer (CSO), chief financial officer (CFO) and other relevant C-suite members to ensure adequate human and financial resources are applied to embedding sustainability into business strategy and implementation. Too often, sustainability commitments are made without adequate capital and the CSO is given responsibility, without authority or resources, to implement an effective program. This has been common for net-zero commitments, for example, and can lead to charges of greenwashing.
In addition, it will be critical to have the full C-suite’s support of the sustainability investments and strategy, and the board can play a role in ensuring that commitment. The CFO is often last to the table on these topics but is essential to ensure both good compliance and good investments. Ideally, the sustainability board committee chair will be the internal champion for the CSO and help to ensure the sustainability agenda is taken seriously by the CFO and others.
In one interesting example of effective governance structure, Arca Continental, a Mexican multinational company that produces, distributes and markets beverages under The Coca-Cola Co. brand among other snack products, has both board-level and managerial-level sustainability committees.

Source: Arca Continental
The managerial-level corporate sustainability team includes the human capital and sustainability committee of the board of directors; a sustainability management committee representing the executive management team; and country-specific sustainability committees.
This dual-level committee structure ensures that sustainability issues are deliberated and discussed at high levels within the company, and across countries and business units, and that these decisions are operationalized. It also creates a platform for sharing best practices and achieving alignment on sustainability issues across countries.

Boards are beginning to recognize that sustainability is a topic that warrants their oversight. However, much of their attention is focused on ESG compliance and reporting versus business strategy and value creation. In today’s world, companies are struggling to find good workers. Meanwhile, climate change is affecting many areas, including commodity prices, transportation and infrastructure, and customers are increasingly demanding sustainable solutions. It’s more critical than ever that corporate boards ensure proper governance, capital allocation and accountability across business units and levels.
