Sustainability disclosures and corporate boards: a stakeholder approach to decision-making

Abstract

PurposeThe board of directors of an organization can contribute considerably to the transition to a sustainable global economy by accommodating environmental, social and governance (ESG) measures in the directors' business model. Along these lines, the purpose of this research is to understand the nexus between the board's structural attributes and sustainability disclosures in an emerging economy such as India.Design/methodology/approachThe authors investigate this link using the system generalized method of moments (SGMM) panel regression on a sample of firms from the National Stock Exchange (NSE) Nifty 100 Index from 2013 to 2020. This econometric framework controls endogeneity among the variables, which has been a gap in the previous studies.FindingsThe authors find that board structural attributes, like board size, gender diversity, chief executive officer (CEO) duality and independence, have little bearing on sustainability disclosures of Indian companies. However, the board of directors, through the board's company's social responsibility (CSR) committee, strives for sustainability practices in Indian organizations. The authors also find that larger companies are more willing to disclose on ESG efforts than smaller ones, but the financial performance of the smaller ones (as proxied by Tobin's Q) does not matter.Research limitations/implicationsThis study is restricted to a sample of large cap listed companies and specific environment, resulting in the non-generalizability of the findings to different contexts because countries vary in their state of economic development, internal policy, regulations and governance.Practical implicationsA mandated CSR committee has helped Indian businesses to publicize their sustainability efforts. Besides the frontrunner in CSR regulations, Indian organizations have paid least attention to the environmental pillar of the ESG framework. Accordingly, the board of directors should put more emphasis on the environmental aspects of their business' sustainability efforts to help achieve sustainable development goals (SDGs) in the medium term and net neutrality in the long term.Originality/valueFrom the standpoint of an emerging economy like India, which has statutory CSR mandates for firms, this research adds a fresh perspective on the relationship between corporate governance and corporate responsibility by employing stakeholder theory, which is further substantiated by the use of system GMM as a robust methodology. This study also emphasizes the significance of a mandatory CSR committee as a facilitator of sustainability practices and reporting in emerging economies.

The Relationship of Corporate Social Responsibility with Business Performance—A Bibliometric Literature Review

“…When it comes to contribution by geographical location, the analysis shows that Europe had the highest number of publications (1150), followed by Asia (885), North America (495) and Oceania (142). This reinforces a similar finding by [34] and emphasizes the leading role of these continents in this area of research and further to the fact that research related to CSR and business performance is growing in popularity in these areas.…”

“…In [140], the nexuses between CSR adoption, business strategies and governance were explored. The study by [141] investigated the relationship between corporate environmental performance (CEP) and innovation, and finally, [142] studied the connection between board structural attributes and sustainability disclosure in the context of an emerging economy.…”

“…In [153], the authors analyzed the impact of creating shared value strategies on corporate performance. In their study, [154] investigated corporate responses to intimate partner violence, whereas [142] examined board structural attributes and sustainability disclosure. The work of [118] focused on the relationship between CSR and forward default risk, while [110] explored the pragmatic characteristics of legitimacy and the CSR activities of firms.…”

Analyzing the Dynamic Relationship Between ESG Scores and Firm Value in Chinese Listed Companies: Insights from Cross-Lagged Analysis

“…The short-term effects of ESG score on market value can be studied using the CL effects system dynamics model, which allows for the analysis of complex systems with feedback loops [51,52]. Several recent studies have used this approach to explore the dynamics of the relationship between market value and ESG score [41,49,[53][54][55][56][57][58][59]. For instance, a study by [53] found that an increase in a firm's ESG score leads to an increase in its market value, which in turn leads to an increase in the firm's ESG score.…”

“…The long-run relationship between ESG scores and market value is not limited to positive effects alone. A study by [40,53] found that firms with high ESG scores may also face higher agency costs, which can negatively impact their value in the long run. The authors used a system dynamics approach to model the complex relationships between ESG scores, agency costs, and market value and found that the negative impact of agency costs can offset the positive effects of ESG scores on market value.…”