Ideas for Leaders #105

Female Directors Create Corporate Sustainability

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Key Concept

Recent research and management thinking often stresses that diversity, especially gender diversity, is a critical factor in improving the quality of a company’s leadership and decision-making. But could it also impact the overall financial, environmental, and social impact of an organization as well?  

Idea Summary

The importance and value of corporate sustainability has been acknowledged for quite some time now. More and more organizations are striving to introduce ‘green’ and policies into their strategic plans. Now, new research suggests that the secret to better sustainability performance lies in having more women on the board.

In a study sponsored by KPMG and Women Corporate Directors (WCD), data from Fortune 1500 companies on environmental, social, and governance performance ‘ESG’ was analyzed by researchers at Berkeley’s Haas School of Business. They choose to measure these three factors in particular as they are good indicators of risk management, opportunity recognition and strong leadership. Specifically in this case, ESG was used to look at the relationship between female corporate directors and corporate sustainability.

The main findings of the study included the following:

  • Companies with more women on their board of directors are more likely to integrate environmental issues into corporate strategy, such as measuring and reducing carbon emissions of products throughout the value chain and implementing programs with their suppliers to reduce carbon footprints.
  • Companies with more women on their board are also more likely to take note of social issues; for example, by providing strong employment benefits and performance incentives, as well as proactively managing human capital development.
  • Finally, companies with more women on their board are more likely to institute a strong governance structure, and have programs, guidelines and clear policies to avoid corrupt business dealings. Additionally, they tend to have strong partnerships with local communities, and high levels of disclosure and transparency.

“The sweet spot is three,” says researcher Kellie McElhaney. “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.”

Wal-Mart, for example, has committed itself to achieving zero waste by 2025, to reduce packaging by 5 percent globally by 2013, and to have globally neutral packaging practices by 2025. 

Business Application

What actions can be taken to promote the placement of women corporate directors and to use of their voice to enable corporate sustainability efforts?

McElhaney and fellow researcher Sanaz Mobasseri stress that empowering women to foster sustainable growth should be a key area of focus for companies as they set employee goals and make hiring decisions, as well as for boards of directors as they steer the course of their companies, and investment teams as they seek to invest in sustainable growth opportunities. In other words, this issue should permeate all aspects of strategic business planning all the time.

Moreover, current female corporate directors need to bring ESG factors and corporate sustainability to the board discussion table. “This is not a women’s or men’s issue, it’s a collective and business opportunity,” say McElhaney. Ultimately, business leaders of both genders must be trained to be 'change agents'. 

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Authors

Institutions

Source

Idea conceived

  • 2012

Idea posted

  • March 2013

DOI number

10.13007/105

Subject

Real Time Analytics