In today’s business landscape, corporate environmental performance transcends mere metrics; it is a strategic imperative. The question then arises: How can organizations prepare themselves to approach environmental challenges, embedding sustainability into the core of business strategies? A recent study by Assistant Professors Asad, Hennig and Professor Oehmichen shows reconfiguring boardrooms to include environmental expertise is one solution.

Boardroom environmentalists can be more than advisors; they can be harbingers of change. With a profound understanding of ecological issues, they can guide companies through the complexities of environmental stewardship. Their strategic insights can enable firms to navigate the risks and opportunities of sustainable growth, ensuring that environmental considerations are integral to corporate decision-making. This is crucial as businesses increasingly navigate the intersection of profitability and environmental responsibility.

Two mechanisms for change

Their study proposes that environmental experts on corporate boards serve as catalysts for change through two primary mechanisms: attention and action. They enhance the firm’s focus on stakeholders, catalyzing a shift from a narrow shareholder focus to a comprehensive stakeholder engagement model. Asad explains: “This transition is vital for aligning business strategies with the interests of various groups, including employees, customers, and local communities. Directors with environmental expertise develop knowledge structures that empower top management to recognize and seize opportunities that cater to a broader set of stakeholders.

Furthermore, these experts drive substantive environmental actions. They bridge information gaps between the firm and its ecological environment, enabling more accurate risk assessments and informed decision-making regarding pro-environmental investments. This capability diminishes information asymmetry and bolsters management’s willingness and ability to invest in essential yet uncertain environmental initiatives.

The effectiveness of these experts is also shaped by the institutional context, particularly national stakeholder salience and environment-oriented legislation. In countries where stakeholder interests are paramount, boards with environmental experts are better positioned to direct corporate focus toward stakeholder concerns, ensuring a stronger stakeholder orientation. Moreover, stringent environmental regulations increase pressure on firms to adopt sustainable practices, amplifying the impact of environmental directors’ expertise.”

Impact

Their study supports these predictions using a sample of over 1000 firms across 15 countries, revealing a positive association between board environmental expertise and corporate environmental performance. These findings are a testament to the power of specialized knowledge in steering companies toward a greener future.

According to the authors, the implications of the study are significant for practitioners, policymakers, and board chairs. Integrating environmental expertise into the boardroom is not just beneficial—it’s imperative. It’s a strategic asset that aligns with the evolving landscape of global business, where sustainability is increasingly a competitive advantage.

Call to action

The call to action is clear according to the researchers: companies must recognize the value of this expertise and make it a staple in their boardrooms. The inclusion of environmental experts on corporate boards is pivotal for firms striving to meet the grand challenge of environmental sustainability. By doing so, companies can ensure that their strategies are not only environmentally sound but also attuned to broader stakeholder interests. It is a step towards a sustainable future that promises benefits for all.

For more information Contact: Sarosh Asad (s.asad rug.nl), Jan C. Hennig (j.c.hennig rug.nl), Jana Oehmichen (j.d.r.oehmichen rug.nl)

Reference

Asad, S., Hennig, J. C., Oehmichen, J., Wolff, M., & Haas, V. (2023). From attention to action: How board environmental expertise influences corporate environmental performance. Strategic Organization, 14761270231197995.