Board governance drivers of corporate sustainability levels in private firms: evidence from Sweden

Asif M. Huq, Katarzyna Cieślak and Klas Sundberg

Sustainability Accounting, Management and Policy Journal, 2024, vol. 15, issue 7, 106-132

Abstract: Purpose - The purpose of this study is to investigate whether board composition affects corporate sustainability (CS) levels in private firms. Additionally, the study examines a potential interplay between CS levels and CS reporting, and the impact of EU Directive 2014 / 95/EU (Non-Financial Reporting Directive [NFRD]) on resources spent on CS. Design/methodology/approach - The authors surveyed the chief executive officers (CEOs), chief financial officers (CFOs) and Environment Officers of Swedish private firms subject to NFRD, receiving 149 valid responses (a response rate 24%). The authors coded the responses using van Marrewijk and Werre’s (2003) CS levels framework. The levels are Pre-CS, Compliance-driven, Profit-driven, Caring, Synergistic and Holistic. The study then explained the CS levels with board characteristics. Findings - While on average the sample firms have a profit-driven CS level, the authors find that CS level is positively driven by female Chairs, female CEOs and external CEOs. Early voluntary reporting before NFRD does not explain the CS level. On adoption of the NFRD, mandatory reporters increased resources spent on CS activities and CS reporting more than early voluntary-reporters. Nonetheless, slightly over half of the sample firms reported no significant impact of the NFRD on resources spent on CS. Practical implications - The findings may be useful for stakeholders interested in corporate governance and CS levels. Also, the findings support further regulation such as EU Directive 2022/2464 (Corporate Sustainability Reporting Directive [CSRD]). Social implications - In private firms, female leaders are likely to play a significant role in driving altruistically motivated CS practices. Originality/value - The focus is on private firms in Sweden which, unlike those in other jurisdictions, were subject to NFRD. Methodologically, the use of a survey provides an alternative to the previous heavy reliance on archival research.

Keywords: Corporate sustainability levels; Private firms; Board diversity; Female CEO; Female Chair; External CEO; Sustainability regulations (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:sampjp:sampj-04-2024-0402

DOI: 10.1108/SAMPJ-04-2024-0402

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