A new study has found that corporate boards are exceeding legal oversight requirements on environmental and social issues.

The report, from the Investor Responsibility Research Center Institute, says more than half of S&P 500 companies go "above and beyond" when it comes to sustainability reporting — including in highly scrutinized industries such as paper, forestry, healthcare, utility companies. However, the retail industry appears to be lagging in regards to recycling and human rights practices reporting.

“The sizable percentage of S&P 500 companies elevating environmental and social issues to the board level reflects the growing understanding among directors and executives of the financial risks and opportunities of sustainability and to the importance to long-term corporate planning,” said Jon Lukomnik, IRRCi executive director.

While sustainability has been a concern of corporations and investors for years, there has been little research focused on how boards oversee a company’s sustainability efforts. This research sets out to fill that gap. It offers an industry-by-industry analysis, along with other detailed analyses such as correlations between revenue and net income for companies with board oversight of environmental and social issues.

“The report identifies key trends on issues and industries, which seem to be a direct reflection of public scrutiny and industry risk exposure,” said Peter DeSimone, report author and cofounder and deputy director of Si2. “For example, energy companies have long been targets of sustainability proponents. It’s logical that these companies would be among the most likely to have Board oversight of environmental issues.”


Among the findings of Board Oversight of Sustainability Issues are:

— 55 percent of S&P 500 companies have explicit oversight responsibilities for social and/or environmental issues.

— Most companies with board oversight of sustainability issues have established independence standards for those committees (81 percent) and permitted them to hire outside counsel, advisors and experts at their sole discretion (92 percent). However, only five percent had set explicit sustainability expertise standards for members of these committees.

— The paper and forestry (100 percent), healthcare services (93 percent), oil and gas (81 percent), utilities (80 percent) and aerospace and defense (80 percent) industries were the most likely to have board oversight of sustainability issues, while the real estate (29 percent), construction and engineering (33 percent), technology hardware (33 percent), retail (34 percent), industrials (35 percent) and media (35 percent) sectors were the least likely.

— About a third of the companies with board level oversight of sustainability issues have assigned that responsibility to the Corporate Governance and Nominating Committee (34 percent) and about the same amount assigns it to a Public Affairs or Sustainability Committee (32 percent). The remainder places the responsibility in other committees or delegates it to the board as a whole.

— Social issues (55 percent) were more often covered by board oversight structures and policies than environmental topics (33 percent). One reason may be that 42 percent of the S&P 500 companies have the board monitor political spending.

The IRRC notes there was a strong correlation between company size, as measured by revenue and net income, and the rate of board oversight of sustainability issues.

To read more about the study, click here.