women leaders and sustainability

When Women Serve on Boards, Sustainability Performance Increases

Companies working to improve sustainability performance would be well served to appoint more women to their boards, a new study suggests.

A new study examining companies’ environmental, social and governance (ESG) performance found that companies with one or more women on their boards were significantly more likely to have improved sustainability practices.

“This is not a women’s or men’s issue, it’s a collective and business opportunity,” said study author Kelli McElhaney, Ph.D., adjunct assistant professor at the University of California’s Berkeley Haas School of Business. McElhaney, who is also the faculty director of the business school’s Center for Responsible Business, co-authored the study with Sanaz Mobasseri, Ph.D. candidate, Berkeley-Haas Management of Organizations Group.

To measure corporate performance, the authors reviewed each organization’s ESG performance. ESG, a widely accepted measure of corporate sustainability among the investment community as indicators of risk management, opportunity recognition and strong leadership, includes the following criteria:

Environmental criteria include steps to improve energy efficiency of operations, to measure and reduce carbon emissions, to reduce packaging and invest in renewable power generation.

Social factors included health care access for underserved populations in developing market supply chains, strong employment benefits and performance incentives, products with improved health or nutritional benefits, and products and services to communities with limited or no access to financial products.

Governance is defined as cleaning accounting, avoiding corruption and bribery and maintaining a high level of disclosure and transparency about business practices.

“Women and sustainability are two sides of the same coin,” said Halla Tomadottir, executive chair and co-founder of Audur Capital in Iceland, who was interviewed for the study. “Corporations build better societies if they have balanced boards.”

“The voices of women are critical in advancing the goals of corporate shared value,” added U.S. Secretary of Agriculture Ann Veneman, who serves on the board of Nestle and also participated in the study.

The Magic Number is Three

When it comes to the number of women serving on boards, researchers found that the magic number seems to be three.

“Companies with at least three female board members had a better ESG performance, but we’re talking about very few companies who meet this threshold – just three of the 1,500 we studied: Kimberly-Clark, General Motors and Walmart,” McElhaney said.

During interviews with female directors, however, McElhaney suggests that some women may be more likely to agree to sit on boards that already have a strong ESG showing. Which comes first, she wonders – adding women to the board or improving sustainability initiatives?

“There is an element of self-selection for me,” explained Dina Dublon, former executive vice president and chief financial officer of JP Morgan Chase, is a director at PepsiCo, Accenture and Microsoft. “I choose to serve on boards who have openness to ESG issues because I care deeply about these issues.”

To expand female board members, McElhaney cited four critical steps: conduct more research in this area; continue to build a pipeline of women to serve on corporate boards; foster a business community of sponsors for females that includes both men and women; and train business leaders of both genders to be “change agents.”

The study, “Women Create a Sustainable Future,” was sponsored by KPMG and Women Corporate Directors (WCD).

 

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