Lead ESG from the boardroom: Turning compliance into competitive advantage

ESG is evolving fast, and boards that fail to keep pace risk falling behind. Amid shifting investor expectations, increasing regulatory demands, and some stakeholder skepticism, one thing remains clear: ESG isn’t going away. In fact, it’s becoming a core driver for long-term value creation, risk management, and strategic differentiation.

Companies integrating sustainability into core business strategy outperform those treating it as a standalone initiative[1]. Despite this, ESG is still too often managed in isolation, leaving a disconnect between boards and management.

At the same time, several large companies have begun to scale back diversity, equity, and inclusion (DE&I) commitments or recalibrate their focus on renewable and sustainable targets. This recalibration has led to confusion in the market, but it also reveals a deeper issue: a lack of board-level readiness.

Boards must build ESG competence

According to recent research studies,feel adequately prepared to oversee the forthcoming wave of mandatory ESG disclosures[2]. This raises a fundamental concern: are boards equipped to govern ESG risks and opportunities with the same rigor as financial risks?

Not everyone is scaling back. Nicolai Tangen, CEO of Norway’s sovereign wealth fund (Oil Fund), remains clear: “ESG and returns go hand in hand.” This message is simple: ESG remains critical to long-term value. So where do you and your board stand? Are you on hold or holding on?

ESG may be changing but it’s not dead

Some argue that “ESG as we used to know it” is over. Perhaps. But the need for reliant, ethical, and environmentally conscious business isn’t. Companies cannot thrive in failing societies or in environments market by climate disruption, human rights violations, or regulatory backlash.

For today’s board directors, it’s essential to understand how Environmental, Social and Governance factors impact revenue, cost, risk, brand, and ultimately, share price. ESG is not just about doing good.  It’s about making informed, value-driven decisions in a world where inaction carries a growing cost.

Investors are still in it for the long run

If you’re uncertain amid shifting political pushback and hesitancy around ESG investments, take note: leading investors are in it for the long run.

Carine Smith Ihenacho, Chief Governance and Compliance Officer at Norges Bank Investment Management (NBIM), states: “ESG isn't about politics for us, it's about long-term financial value creation and managing risks and opportunities.” NBIM manages one of the largest sovereign wealth funds globally, and their 2024 Responsible Investment report confirms their continued focus on sustainability as a value lever.

Regulatory expectations are shifting

Governments and regulators have been pushing the ESG agenda for years through sustainability reporting requirements. However, concerns raised by both investors and corporate leaders about complexity have prompted a shift in frameworks.

The European Commission’s Omnibus Proposal is one such response. It suggests easing some obligations in the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), especially for companies with fewer than 1,000 employees or €450 million turnover.

However, simplification does not mean deregulation, and EU’s broader goal remains clear: to secure Europe’s sustainable prosperity and competitiveness. (See Draghi Report on Competitiveness.)

Closing the board management ESG gap

This is a defining moment for conscious leadership. Boards must rise above “wait and see” postures and lead with conviction. That means:

  • Closing the ESG competence gap.
  • Embedding sustainability into core strategy.
  • Building trust and transparency with executive teams.

Boards should establish ESG as a permanent fixture in the agenda, request regular updates from management, and hold meaningful discussions on material issues.

Time to shift from a sustainability strategy to a sustainable strategy

Embedding ESG in corporate DNA requires more than just setting targets or publishing reports. Directors must align ESG objectives with company purpose and long-term business strategy not only due to regulatory pressure, but because it reflects stakeholders expectations and is essential for future growth.

To achieve this, boards should:

  • Map and engage with key stakeholders.
  • Prioritize material ESG issues through double materiality.
  • Integrate ESG into innovation, risk, and investment frameworks.
  • Consider ESG performance as a driver of operational and financial resilience.

Futureproof your board

The ESG for Boards competence program, developed by FutureBoards and DNV, helps boards navigate this transformation. Through expert-led sessions, real-world case studies, and practical tools, the program empowers board members to:

  • Navigate evolving ESG-related regulations, governance codes, and compliance standards
  • Investor and stakeholder expectations are increasing
  • Regulatory simplification ≠ reduced accountability
  • ESG strategy must be integrated, not isolated
  • Board competence is critical for sustainable governance

As one of our speakers from McKinsey (Frithjof Lund, Managing Partner of McKinsey & Company Norway and lead of McKinsey's Board Services globally) noted, “Boards need to play offense, instead of defence.” That means staying ahead of the curve, asking the right questions, and ensuring that sustainability isn’t a checkbox but a compass for future growth and success.

Ready to lead?

The future belongs to boards who look ahead, lead with purpose, clarity, and courage. Gain the knowledge, tools, and insights needed to lead sustainability from the top.

Explore the ESG for Boards Competence program.

This article was written with the contribution of Victor Martins, Sustainability Consultant at DNV.

 

  1. EY: The future of sustainability in business: why success depends on integration.
  2. PwC: Annual Corporate Directors Survey.

8/19/2025 8:35:00 AM