Abstract
We examine the resource provision role of the board of directors in ensuring substantive corporate sustainability practices. Specifically, we examine two channels of resource provision (i.e., the presence of non-executive directors with previous experience in environmental issues—EEDs—and network connections of EEDs) that can affect a firm’s ethical and environmental behavior. Using greenhouse gas (GHG) emissions data from FTSE 350 firms, as a measure of environmental performance, we show that the presence of EEDs on the board is associated with lower GHG emissions. Further, firms with better-networked EEDs have better environmental performance. A possible mechanism is that firms with EEDs invest more in environmental technology. These results suggest that, in addition to the traditional role of shareholder value maximization, the board of directors also caters to the interests of wider stakeholders of the firm by facilitating substantive ethical practices.
Highlights
Environmental impact of production and business activities is one of the most pressing questions of our times
We find that better-networked Expert Directors (EEDs) are associated with lower greenhouse gas (GHG) emissions
We show that the presence of at least one director with environmental experience on the board is associated with lower GHG emissions
Summary
Environmental impact of production and business activities is one of the most pressing questions of our times. Firms are under increasing institutional pressure to be environmentally responsible, and this pressure manifests in different ways. In the UK, under the Companies Act 2006, listed companies are required to report greenhouse gas (GHG) emissions since October 2013. All these initiatives aim at improving firms’ ethical behavior in terms of environmental sustainability and their success is likely to depend on how the corporate sector responds to them. There is little evidence on how firms internalize these institutional pressures or how corporate governance impacts upon the environmental performance of firms
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