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Sustainability

Fresh Impetus for Greater Sustainability in Boards: Women Drive Corporate Sustainability Forward

  • March 2021

BERLIN / GÖTTINGEN – March 23, 2021 – Companies adopt more socially and ecologically sustainable practices when the board includes women and environmental experts and when younger members are elected to the board on a regular basis. Such are the initial findings of a big-data study focusing on publicly traded European companies, conducted by the leadership consulting firm Egon Zehnder in cooperation with the University of Göttingen.

“Corporate sustainability must be anchored more firmly within boards,” says Dr. Carsten Wundrack, Head of the German Industrial Practice at Egon Zehnder. He notes that statistical analysis shows the effectiveness of the board is measurably related to key aspects of diversity. “Companies’ business practices align more closely with environmental and social criteria when the board includes an above-average proportion of women and the average age is lower than usual.” The proverbial “breath of fresh air” also has a positive effect: According to Wundrack, the balance shifts toward sustainability when the board is diverse and includes proven sustainability expertise.

What factors impact corporate sustainability?

The research team examined large volumes of data, spanning a total of thirteen years, related to environmental, social, and corporate governance issues. The study found that the gender, age, and length of tenure of the board members, as well as relevant experience in sustainability, all have an impact on corporate sustainability, also commonly referred to as “ES performance.” This was the conclusion reached by Egon Zehnder and the scientists under the project leadership of Prof. Dr. Michael Wolff and Katharina Kemmerich of the University of Göttingen, based on data from 534 listed European companies encompassing around 4,100 data points.

Corporate sustainability on the board agenda

The researchers underscore the statistically significant link between the makeup of the board and the development of corporate sustainability. This means that the trends are not coincidental, but that there is a verifiable relationship between the composition of the board and ES performance. The companies with the highest proportion of women on the board have an ES performance that is six percentage points higher than average within the random sample. The same applies to age and board tenure: Boards with the youngest members and the shortest board tenure perform better by more than seven percentage points each. It also emerges that the existence of a sustainability committee with the relevant expertise has a significant impact of more than 13 percentage points on the corporate sustainability of the companies analyzed. In the coming weeks, the findings of the study will be discussed with boards and explored in greater depth. 

Additional hypotheses have already been put forward for discussion and further analysis. For example, it is assumed that due to the corporate sustainability factor, companies with younger and more diverse boards will be better equipped to face the future and that the capital market will show a preference for such companies. Wundrack attributes this to the growing importance of sustainability to commercial success. “Pressure from both the general public and investors, as well as a clear desire on the part of companies to align themselves with environmental and social criteria, has risen steadily over the past few years.” He sees this as a major opportunity for boards to systematically engage with this issue and establish a strategic dialog with the executive management of their companies. After all, he argues, this often goes hand in hand with a fundamental realignment of business models, not to mention substantial investments.

In other European countries, efforts have been made to reflect this priority by boards setting up sustainability committees. And indeed, according to the study, this has a “positive impact on corporate sustainability – especially when such committees are invested with specific sustainability expertise,” says Kemmerich.

Good corporate governance fosters sustainability

The study indicates that boards should focus more intensively on sustainability as a strategic issue, thereby giving the topic higher priority and enabling companies to meet the demands of environmental protection and social responsibility even more effectively. This would enable the board to have a significant positive impact on the company's long-term competitiveness. “The study shows that the board can play a decisive role in driving the transformation process in dialog with executive management,” says Wolff. 

About the Boards and Sustainability Study

Part of a research partnership between Egon Zehnder and the Chair of Management and Controlling at the University of Göttingen, the “Boards and Sustainability Study” analyzed data from 534 companies in Europe encompassing around 4,100 data points. Using systematically compiled empirical data that were then subject to many different econometric analyses, it was possible to draw conclusions about factors in the composition of the board that impact on the ES performance of companies. The underlying data was obtained from databases that are widely used in the scientific community (e.g. Thomson Reuters, Datastream, BoardEx) as well as from the companies’ annual reports. 

About the Chair of Management and Controlling, University of Göttingen

Under the leadership of Prof. Dr. Michael Wolff, the team from the Chair of Management and Controlling explores the many aspects of corporate governance systems through teaching, research, and practical applications. The Chair's research activities have an empirical focus and investigate, among other things, the composition of boards and their impact on corporate governance.  The Chair is located in the Faculty of Economic Sciences at the University of Göttingen, an internationally renowned research university with a rich tradition. With its 13 faculties, it is home to a diverse spectrum of academic disciplines covering the natural sciences, humanities, social sciences, and medicine. 

 

About Egon Zehnder

Egon Zehnder is the world’s preeminent leadership consulting firm, sharing one goal: to help people and organizations transform. We know what great leaders can do and are passionate about delivering the best solutions for our clients. Our services include: leadership development, individual, team and organizational effectiveness, CEO search and succession, executive search and assessment, Board advisory, and cultural transformation. 

Press Contact

Martin Klusmann
Egon Zehnder
Head of Corporate Communications Germany
martin.klusmann@egonzehnder.com
Telefone: +49 170 2360101

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