A third of company leaders feel “underprepared” about directors’ duties in relation to sustainability issues, according to a snap poll of senior executives and board members.

The survey, by the Sustainability Board, a think tank, finds that 33% of those questioned say they are not properly equipped to understand how “sustainability impacts directors’ duties”.

It was not the area with the greatest uncertainty, however. A substantial 44%, say they are not equipped to deal with the data and intelligence on sustainability topics while 40% say they lack clarity on looming ESG regulations.

A blog from the Sustainability Board, which questioned 57 senior people for the poll, says: “The findings suggest that corporate boards have a long way to go to upskill and equip themselves to govern organisations in an era of heightened sustainability expectations and requirements.

“They need better data, external expert advice, benchmarks and governance structures to integrate issues into core oversight responsibilities.”

The results come at a time when there is significant development of ESG regulation for companies across Europe and the US.

The European Union has just passed the Corporate Sustainability Due Diligence Directive (CSDDD), which will see companies forced to conduct due diligence in their supply chains on environmental and human rights risks.

Liability risk

The new rules come with new reporting obligations and provisions for liability for non-compliance.

CSDDD comes in addition to the Corporate Sustainability Reporting Directive (CSRD), which introduced a wide array of new non-financial reporting rules.

In the US, the chief financial watchdog, the Securities and Exchange Commission, passed new climate risk reporting regulations for Wall Street companies.

Many UK companies already reporting under guidelines set in 2017 by the Task Force for Climate-related Financial Disclosures (TCFD), but watchdogs are in the process of reviewing new international sustainability reporting standards, ready for mandatory use.

Uncertainty on directors’ duties has become an issue in the UK. A campaign, the Better Business Act, has been under way since 2021, calling for a rewrite of Section 172 of the Companies Act, which currently defines directors’ duties.

Last week, the Institute of Directors (IoD) issued its own “election manifesto,” which restated its desire to see duties redefined in law.

Clarity over duties is viewed as reflecting “the key role directors play in society” but also a key part of the UK’s economic future. Roger Barker, director of policy at the IoD, says reformed governance is part of the “policy framework” that could help “re-ignite the UK’s growth engine”.

The IoD also calls for a “fundamental” review of corporate reporting, in part because its onus is shifting from historical financial data to an “increasing emphasis on environmental and stakeholder impact”.

Sustainability is a catch-all for many issues affecting businesses in the current environment. The Sustainability Board’s snap poll is evidence that some boards and managers have a better understanding than others. Worryingly, the problem may be significant.