Global Boards Make Progress On Sustainability, But New Risks Emerge

A new global survey by INSEAD, Heidrick & Struggles, and BCG has found that while boards of directors are making progress in addressing sustainability issues, they are increasingly concerned about the looming threats of artificial intelligence and geopolitical risks.

The report revealed that boards have made meaningful advances to address sustainability topics, but are less confident when it comes to their understanding of other issues such as the rising importance of generative AI, intensifying trade and geopolitical disruptions. 

These four interconnected pillars are forcing directors and chief executive officers (CEOs) to navigate an increasingly unpredictable environment filled with conflicting and often politically charged demands. Additionally, the report showed simmering discord among company leadership on how best to enhance competitiveness amid the challenges they face.

The report reveals that 77 per cent of the global board members surveyed believe their company has a responsibility to address societal concerns, although more than half (54 per cent) believe that business objectives should remain the primary focus. In contrast, only 36 per cent feel prepared to leverage the disruptive potential of AI, while just 37 per cent agree that their firms have sufficient strategies in place to manage geopolitical risks. 

Notably, these findings highlight an urgent need for a greater balance between traditional governance with forward-looking strategies and increased investment in board competency. Despite lower levels of confidence in the prevailing risks and emerging technologies, over 60 per cent stated that their boards are “leaning in” on risk management.

Lack Of Confidence Amid Growing Complexity
In a concerning indication of division within the boardroom, the new report reveals that 29 per cent of directors lack confidence in their CEO’s ability to navigate disruption and boost long-term value. Meanwhile, a comparable number of CEOs (26 per cent) are equally sceptical of their board’s effectiveness, reflecting an increasing tension between top leadership teams grappling with a more complex and diverse range of issues than ever before.

The report also found that roughly half of directors are not confident their company is equipped to identify new threats and opportunities related to sustainability, generative AI and geopolitics, nor are they able to translate them into a competitive advantage. As global business landscapes continue to shift, the ability of boards to stay cohesive, align with leadership, and adapt to new challenges with innovative corporate strategy will be more critical than ever, the report added. 

Effective governance that embraces both foresight and resilience will be key in turning these disruptions into opportunities, allowing businesses not only to survive but to thrive in an increasingly volatile world. Sonia Tatar, Executive Director, INSEAD Corporate Governance Centre said, “Boards today can benefit from moving from being reactive to proactive. Beyond understanding disruptions, they can focus on looking ahead—anticipating future shocks and potential risks and finding ways to capitalize on emerging trends to leverage opportunities.”

According to Tatar, by translating insights that inform decision-making into strategic actions, they will be better positioned to guide companies in becoming more resilient and navigating change effectively.

Jeremy Hanson, Partner with Heidrick & Struggles commented, “While it is encouraging that boards are stepping up on sustainability, this year’s survey reveals tensions between directors and management regarding each other’s capacity to navigate disruption. With so much at stake—and increasing complexity to unpack—alignment between board directors and management isn’t just a best practice; it’s essential for addressing both today’s challenges and those of the future."

Importantly, alignment does not mean boards should shy away from constructive debate with management. Fostering open, even difficult, conversations is crucial for boards to reach resilient, well-rounded decisions in today’s demanding environment, Hanson added. 

David Young, Managing Director and Senior Partner, BCG added, “Boards are facing new and increasingly complex challenges, amid geopolitical uncertainty, rapid advances in technology, and continued concerns over the impact of climate change. But boards have made notable progress in tackling sustainability--and now there is an opportunity for them to learn from these efforts as they engage in deep conversations with executive leadership to confront this expanding agenda.”