Carbon emissions: does boardroom gender diversity impact the level of corporate emissions?
A new study highlights that increased representation of female directors in the boardroom – following gender reforms that have taken place in many countries– has led to a significant fall in carbon emissions related to companies’ activities.
11/14/2024
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As highlighted at the COP 29 Convention in Baku (Azerbaijan), climate change, primarily driven by carbon emissions, continues to pose a major threat to global economic stability and social welfare. Clearly, many different stakeholders, including companies, banks, governments, and consumers, have a role to play in the transition towards a low-carbon economy.
Previous research has already highlighted that gender reforms and guidelines introduced in different countries have led to greater representation of female directors in the boardroom, and that this has a direct impact on a company’s socially responsible activities.
In this *study, the researchers Barroso, Duan, Guo, and Kowalewski explored the extent to which an increased representation of female directors on corporate boards impacts the level of corporate carbon emissions.
Data from companies in 50 countries
The research team analyzed emissions data from a sample of nearly 10,000 companies from 50 countries for the period from 2002 to 2019. Measures included both direct emissions (from the use of fossil fuels and consumption of purchased energy) and indirect carbon emissions from supply chain activities.
They first analyzed the changes in the representation of female directors on company boards across these countries, comparing those with and without board gender diversity reforms.
“The results confirmed a significant increase in female directors in firms headquartered in countries that introduced board gender diversity reforms,” explain Professors BARROSO and KOWALEWSKI..
The team then assessed the impact of this increased female representation on changes in companies’ carbon emissions.
“Our findings show that firms increasing their number of female directors in response to these reforms experienced reductions in both direct and indirect carbon emissions. On average, each additional female director contributed to a 4.02% decrease in direct emissions and a 2.61% decrease in indirect emissions, highlighting the significant role of gender diversity in environmental progress.”
In contrast, the analysis found that in countries without gender diversity reforms, firms with more female directors did not experience the same reductions in carbon emissions. These firms showed emission patterns similar to those of other companies in the study that did not increase female representation on their boards.
These results highlight, therefore, the effectiveness of legislative actions in promoting gender diversity on boards and in driving the reduction of carbon emissions.
What role does national culture play?
The team also examined the impact of national culture as they hypothesized that this could potentially influence the effectiveness of corporate board reforms and perceptions of corporate social responsibility (CSR)
They found that the reductions in carbon emissions were particularly amplified in countries recognized as collectivist countries (using the definition of the social psychologist Geert Hofstede). These are cultures that prioritize the needs of the group above the needs/wishes of an individual, with examples including major economies such as Japan, South Korea, and China.
In cultures with higher degrees of individualism, where personal autonomy and individual achievements are highly valued—such as in the United States and the United Kingdom—the researchers found that emission reductions were less pronounced following increases in female board representation.
Impact of the Paris Climate Agreement
Finally, the researchers noted that the impact of increased female board representation on carbon emissions reduction was notably more pronounced in the post-2015 Paris Climate Agreement period, highlighting the influence of increased regulatory insistence on corporate environmental practices. “Prior to the agreement, the reforms focused primarily on mitigating direct emissions”, the paper notes.
Applications for policymakers and companies
“Our cross-country analysis consistently demonstrates that such reforms leading to an increase in the number of female directors result in reduced corporate carbon emissions”, the researchers note. This work, therefore, contributes to a broader understanding of how gender diversity reforms on boards intersect with environmental sustainability.
It emphasizes the need for robust regulatory enforcement and cohesive global collaboration to reduce carbon emissions from a policy perspective. In a broader societal context, corporations’ commitment to gender diversity and effective regulatory frameworks are essential for combating climate change and promoting sustainable development.
“From an investor perspective, these findings are also crucial for navigating escalating environmental risk” explains Professor BARROSO and Professor KOWALEWSKI. “This means that as companies bring more women onto their boards, they are likely to be better positioned to address environmental challenges. For investors, this can signal a commitment to sustainability and potentially lower long-term risk, making such companies more attractive for responsible investment.”
*”Board gender diversity reform and corporate carbon emissions” (Journal of Corporate Finance, 2024) Raúl Barroso, Tinghua Duan, Siyue (Sarina) Guo, Oskar Kowalewski.
