Companies with more women in the boardroom are less prone to greenwashing: Study

A 29-country study finds that firms with more gender-equal boards are less likely to exaggerate their sustainability credentials. It also found that companies in more religious countries were more likely to greenwash, since religion tends to promote traditional gender roles.

Companies with more female representation in the boardroom tend to be more open and honest about their ESG performance, and are less prone to greenwashing,
Companies with more female representation in the boardroom tend to be more open and honest about their ESG performance, and are less prone to greenwashing, a study by researchers from the University of Portsmouth, Brunel University and Loughborough University found. Image: Michael Svoboda/Flickr

Corporations with more gender-equal boards are less likely to exaggerate their sustainability credentials, according to a study of almost 4,000 firms in 29 countries.

Researchers from University of Portsmouth, Brunel University and Loughborough University in the United Kingdom looked at “environmental, social and governance (ESG) decoupling” data, which refers to the gap between what firms disclose about their ESG practices and their actual sustainability performance between 2005 and 2019.

They found that companies with higher female representation in the boardroom tend to be more open and honest about their ESG performance, and are less prone to greenwashing

The study found the most marked drop in the likelihood of greenwashing in more gender-equal companies operating in controversial sectors such as oil and gas.

The study examined companies in territories including China, Hong Kong, Indonesia, Japan, Thailand, United States and United Kingdom, and analysed ESG performance ratings from a database compiled by Refinitiv, an analytics firm.

Board gender diversity not only improves firms’ ESG practices but also mitigates the managerial opportunistic behaviour related to it.

Japan and Taiwan stood out as territories with particularly gender-unequal boardrooms and high ESG decoupling, or greenwashing. Thailand and New Zealand emerged as the countries with the most gender-equal boardrooms and the lowest disparity between what companies are saying and doing.

“Our study supports existing theories that women directors are crucial players in preventing [ESG decoupling], as [women] are more likely [than men] to speak out against unethical behaviour, and support environmentally-conscious decisions,” said Dr Ahmed Aboud, from the University of Portsmouth’s School of Accounting, Economics and Finance. 

Christine Amour-Levar, founder and chief executive of Singapore-based non-profit HER Planet Earth, said she was not surprised by the findings. “In my experience women show more positive green consumption intention, have more-responsible attitudes towards climate change and show more interest in protecting the environment than men.”

She pointed out that numerous other studies have found a connection between gender diversity and better corporate governance.

Firms with a fairer representation of women in the boardroom tend to be less fraudulent, are better at managing water resources, and more effective at lowering their carbon emissions.

But only 6.7 per cent of board chairs globally are women, and even fewer CEOs – 5 per cent – are women, according to a study by professional services firm Deloitte published last February. A global average of 19.7 per cent of board seats are held by women, an increase of 2.8 per cent since 2018.

The new study’s authors suggest that policymakers need to think carefully about boardroom diversity to ensure corporations make a genuine contribution to issues such as the energy transition and curbing deforestation.

Countries including France, Germany, India, Israel, Italy, Norway, Pakistan and Spain now have legislated quotas for women on corporate boards of publicly listed companies.

Jessica Robinson, founder of responsible investment and gender consultancy Moxie Future, said she supports mandatory quotas for women on corporate boards. “We do not have the time to sit back and wait for it to happen, particularly when we have increasing evidence of the impact that female leaders are having.”

“Diversity on boards is critical to avoid group think and bring other perspectives which are critical to a responsible and well-functioning board. But it is more than that - we know that women tend to be better long-term thinkers than men as well as having high motivation to consider sustainability issues,” she said.

Robinson added that in Asia, where corporate boards are still male dominated in many countries, there was a need to “wake up” given the unique climate issues the region is facing.

The study also suggests that policymakers explore other attributes of board diversity, including age, ethnicity, nationality, financial and industry expertise, and their impact on greenwashing.

Dr Ahmed Saleh, from Brunel Business School at Brunel University, said he hoped the research would show policymakers the importance of improving gender diversity in boardrooms and motivate decision-makers to mandate board gender diversity quotas.

Religion and greenwash

The study also found that the impact of boardroom gender diversity on greenwashing is correlated to how religious a country is.

“Countries with higher levels of religiosity tend to adopt views supporting traditional gender roles between men and women, and as a result see female directors being less influential in their roles,” said Dr Yasser Eliwa from the School of Business and Economics at Loughborough University.

The paper, published in Business Strategy and the Environment, concluded that regulators need to do more to tackle greenwashing, which remains relatively unpoliced globally.

Australia, the European Union, South Korea and the United States are among the territories that have started to penalise companies for greenwashing, but few companies have faced serious legal consequences for embellishing their green credentials.

This week, the Australian Securities & Investments Commission (ASIC) started investigating a complaint by Comms Declare, a non-profit, against oil major Shell for alleged greenwashing.

Comms Declare contended that Shell Australia may have breached sections of the federal Australian Consumer Law by giving investors and consumers the false impression that the company has a plan to be net-zero by 2050.

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