Sustainable board governance and environmental performance: European evidence

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The ambitious EU Green Deal project is linked to extensive regulations on sustainability reporting, sustainable finance, and sustainable corporate governance. With increasing awareness of the impact of sustainable board governance on corporate environmental performance, our paper includes an innovative sustainable board governance score, reflecting significant board attributes. The question arises whether the combined effect of sustainable board measures, based on (1) sustainability board committees, (2) a critical mass of female board members, and (3) sustainability-related executive compensation, influences environmental performance and its main sub-pillars according to the EU Taxonomy Regulation. Based on stakeholder and critical mass theories, our study empirically addresses the impact of sustainable board governance on environmental performance and five sub-pillars (carbon, emissions, biodiversity, resource use, and water performance). Using a sample of 2630 firm-year observations from 2014 to 21, we find that sustainable board governance significantly improves environmental performance and the related sub-pillars, except for biodiversity and water performance. Our findings are robust to robustness analyses and endogeneity checks. To the best of our knowledge, we are the first to rely on the combined effect of sustainable board attributes and its impact of environmental performance and its major sub-pillars. Thus, this study provides new insight into the relationship between corporate governance and environmental performance in the EU capital market to guide researchers, business practice, and regulatory bodies.

Original languageEnglish
JournalBusiness Strategy and the Environment
Volume33
Issue number4
Pages (from-to)3397-3421
Number of pages25
ISSN0964-4733
DOIs
Publication statusPublished - 05.2024

Bibliographical note

Publisher Copyright:
© 2023 The Author. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd.

    Research areas

  • board gender diversity, critical mass theory, CSR committees, CSR-related compensation, environmental performance, sustainable corporate governance
  • Management studies

DOI

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