The mediating role of carbon emissions in the relationship between the board attributes and ESG performance: European evidence

Abstract

PurposeThis study seeks to investigate the impact of board attributes on environmental, social and governance (ESG) performance, along with exploring the mediating role of carbon emissions in this relationship.Design/methodology/approachTo address this objective, the panel data approach was used to analyze the data were collected from 1,621 European companies from 2017 to 2021.FindingsThis study shows that board gender diversity, audit committee independence, expertise and board meeting attendance help enhance ESG performance. On the contrary, board size and composition do not affect ESG performance. The findings also showed that board gender diversity, audit committee independence, expertise and board meeting attendance are negatively related to carbon emissions performance. However, board size is related positively to carbon emissions performance. This indicates that the larger boards of directors may have diverse experiences that enhance the environmental performance of companies. Furthermore, the finding showed companies that contribute to lowering carbon emissions are more willing to improve their ESG performance. Also, carbon emissions mediate the relationship between the board's attributes and ESG performance.Originality/valueThe study's results have significant implications for firm managers in enhancing the efficiency of board decisions in determining environmental practices that matter to various groups of stakeholders. In addition, this study provides valuable input to regulators and policymakers regarding strengthening the regulations and controlling tools that enhance environmental performance.