Study finds female board directors boost environmental performance

Gender diversity makes clear difference to 'environmentally impacting industries'

Companies with women on their board of directors perform better on environmental issues, says a study by researchers at the Haskayne School of Business.

“What I want to make clear is that our study is not suggesting: ‘OK, boards should be 100 per cent women,’ or that all women will necessarily do a better job at environmental performance than men,” says Dr. Irene M. Herremans, PhD, who is a professor in the Sustainable Energy Development program at Haskayne.

“What it is suggesting is that there needs to be gender diversity on boards because women often bring different expertise to a board than men, and that poor gender diversity makes a clear difference in what we call the more environmentally impacting industries, such as resource extraction and manufacturing.”

'Far more diversity of experience'

The study, which was recently published in Business Strategy and the Environment, was co-authored by Herremans and Dr. Jing Lu, PhD, a former graduate student at Haskayne who is currently an assistant professor at the University of Guelph’s Gordon S. Lang School of Business. It looked at 857 unique firms on S&P’s 1500 Composite Index, which represents about 90 per cent of stock market capitalization in the U.S.

Irene Herremans

Study co-authored by Irene Herremans finds female board directors boost environmental performance.

Courtesy Irene Herremans

Despite a long-standing movement in the business world to help qualified women become board members, things haven’t changed much over the years, says Herremans. For the full sample of 4,872 observations that were made for the study between the years 2009 to 2015, the proportion of women on boards ranged from only 14.39 to 18.03 per cent.

“Sometimes the perception is that women are just not qualified to take part in board decisions, but when we looked at their expertise in terms of the environment, our research showed that the females who were on boards had far more diversity of experience than the males,” says Herremans.

“Not only had they worked for some form of environmental not-for-profit or for-profit organization, they also had some work experience that tended to be complementary, such as government or public affairs. Government regulations are a big part of dealing with the environment, along with working with stakeholders and their demands, which involves public affairs.”

Precautionary approach

Herremans says the point is not that the skills of such female executives are superior to those of men, but that they help widen the mix of expertise available to boards as companies navigate the growing complexities of things such as sustainability and climate change.

Jing Lu

The paper on gender diversity on boards a part of Jing Lu’s graduate dissertation.

Courtesy Irene Herremans

“If you’re a resource extractor or a manufacturing firm, bringing women on to the board will bring new and different expertise,” she says. “Of course, you don’t just choose any woman to come on the board. You make sure they have the expertise that you need to bring on this diversity of experience that is going to help your environmental performance.”

Although the study doesn’t identify why female executives tend to boost such performance, Herremans says other researchers have outlined several factors. “Women tend to have a lower acceptance for unethical behaviour or practices, and they also tend to be more risk-averse,” she says.

As a result, female board directors tend to take a more precautionary approach to climate change, she says. “They would be quicker to say it is best to try to reduce our greenhouse gas emissions,” says Herremans.

The Haskayne study adds to the evidence that women help strengthen the boards of companies, she says. “Firms are struggling with gender diversity, especially in top management, and our study shows you’re not only getting better representation for your shareholders, many of whom are women, you also gain expertise in the environmental area and go on to improve your environmental performance,” she says.