New regulations mean companies in Europe are more likely to appoint board members with concrete sustainability experience, according to research.
A new package of European rules on sustainable and responsible entrepreneurship is starting to take visible shape in the boardroom. Large Dutch listed companies are hiring more supervisory board members who have knowledge and experience in the field of sustainability.
In 2022, a quarter of the new supervisory directors in the Netherlands had experience with or knowledge of the theme. That was 10% a year earlier. This is the conclusion of the American leadership consultancy Heidrick & Struggles (H&S). For its research, it screened the boardrooms of all companies in Europe that are included in the most important national stock market indices. In the Netherlands, this concerns the 25 AEX funds, such as ASML, ING and Unilever. In total, H&S surveyed more than 800 companies.
With 25% of newcomers, the Netherlands is ahead of the European average, says Imke Lampe, director of the Dutch division of H&S. According to the survey, of all new board directors who started in Europe last year, an average of 19% had “demonstrable” sustainable knowledge. This must include concrete work experience, says Lampe. “For example, someone who led a project at Unilever to replace harmful palm oil with plant-based alternatives.”
Monique van Dijken Eeuwijk, lawyer and board director at a number of listed companies, says that the rapid change in expertise in the boardroom has to do with European rules. “If companies didn’t already want to become intrinsically sustainable, they will have to with the new regulations that are coming.’
These regulations concern the Corporate Sustainability Reporting Directive, agreed in Brussels last year. Large companies, and in any case those with a stock exchange listing, must explain their impact on the climate, society and vice versa in their accounts from 2024. That sounds vague, and directors think so too, Van Dijken-Eeuwijk hears when she talks to companies.
According to her, directors are used to seeing their company’s progress in profit and turnover figures. But that will soon no longer suffice: if it is up to Brussels, reporting will go deeper into environmental, social and governance (ESG) factors than it does now. “How do you value and measure those aspects? There is still so much uncertainty about the subject. No wonder they now all bring sustainability knowledge in-house,” she says.
According to H&S’s Lampe, the labour market is another reason for companies to increase environmental awareness. “You really have to integrate sustainability into your business strategy, otherwise it will be very difficult to attract young talent, let alone retain it.” According to her, “many young people don’t want to work at all for a company that is not concerned with sustainability”.
The argument that sustainability is something companies do for the stage is old news as far as Lampe is concerned. Van Dijken-Eeuwijk confirms this, although she believes it will take some time before the business community pays “intrinsic” attention to the climate. In other words: “When the insight lands that the climate is not something you do on the side, but that it is part of your right to exist.”
She thinks this will work out as companies learn to deal with the rules. “It used to be the same with women on the board.” Females are now a common sight in the boardroom, but were once a rarity. Legislation on gender equality gave an impulse to this.
The fact that this turnaround is now in full swing is also apparent from the H&S figures. In 2022, the share of women on the board increases in Europe – of all new appointments, 497, almost half were women (49%).
Belgian companies in particular took on many women, accounting for 60% of all new appointments. At Dutch companies, 52% of all new board directors were women. Poland, on the other hand, still has a long way to go. The share of women in new appointments is 25%, putting the country at the bottom of the list.
Rules are again the driving force here. In November last year, the European Parliament passed a law requiring companies with more than 250 employees to have 40% of all non-executive board positions held by women. The law will come into effect in 2026. French companies already comply with this with an average of 44%. In the Netherlands this is 36%.
This article originally appeared in Dutch business newspaper FD, on 18 May 2023