Sustainable but uneven: How corporate governance influences environmental and social priorities
DOI:
https://doi.org/10.7433/s130.2026.04Keywords:
Corporate Governance, ESG gap, Environmental performance, Social performanceAbstract
Frame of the research: Environmental and social issues have become among the most pressing global challenges. As a result, firms are increasingly evaluated on their ability to address ESG issues.
Purpose of the paper: An integrated approach simultaneously advancing all ESG pillars is essential to achieve sustainability. However, firms often exhibit an imbalance in performance across the environmental and social pillars, i.e., an ESG gap. This study examines how board characteristics influence the magnitude of this gap.
Methodology: This study applies a two-way fixed effects model, controlling for heterogeneity at the industry and country levels, with standard errors clustered at the firm level, on an unbalanced panel dataset comprising 8,014 firms from 39 countries over the period 2013-2023.
Findings: The presence of women directors is associated with a reduction in the ESG gap. Similarly, CEO duality and the establishment of a CSR committee are associated with a reduction in the ESG gap, although their effect is not consistent across all model specifications. In contrast, the presence of independent directors and directors with industry-specific or financial expertise is associated with a wider ESG gap.
Research limits: Data is obtained from a single source, which may introduce common method bias. The ESG gap relies on measures that may capture formal disclosure practices rather than substantive ESG performance. Our measure of the ESG gap captures the magnitude of the imbalance between environmental and social performance, but not its direction. Causal relationships cannot be fully established. Sectoral or institutional heterogeneity are not explored. How the board of directors evaluates and manages trade-offs between environmental and social objectives is not investigated.
Practical implications: Increasing the presence of women directors may reduce the ESG gap. CEO duality should be promoted with caution, and CSR committees should be meaningfully integrated into strategic decision-making, with sufficient authority and expertise. Conversely, overreliance on independent directors and directors with industry-specific or financial expertise should be avoided. Policymakers and regulators should guide firms in this direction and encourage them to provide more comprehensive disclosures on both environmental and social performance.
Originality of the paper: This study extends the application of the attention-based view to the ESG domain by explaining why ESG gaps may emerge. It introduces the ESG gap as a distinct construct. It integrates attention-based view and upper echelons theory to show that board characteristics shape how ESG priorities are strategically distributed across ESG dimensions.
References
ABDULLAH A., YAMAK S., KORZHENITSKAYA A., RAHIMI R., MCCLELLAN J. (2024), “Sustainable development: the role of sustainability committees in achieving ESG targets”, Business Strategy and the Environment, vol. 33, n. 3, pp. 2250-2268.
ALAZZANI A., HASSANEIN A., ALJANADI Y. (2017), “Impact of gender diversity on social and environmental performance: evidence from Malaysia”, Corporate Governance: The International Journal of Business in Society, vol. 17, n. 2, pp. 266-283.
ANANZEH H., AL AMOSH H., ALBITAR K. (2022), “The effect of corporate governance quality and its mechanisms on firm philanthropic donations: evidence from the UK”, International Journal of Accounting and Information Management, vol. 30, n. 4, pp. 477-501.
ARAYAKARNKUL P., CHATJUTHAMARD P., TREEPONGKARUNA S. (2022), “Board gender diversity, corporate social commitment and sustainability”, Corporate Social Responsibility and Environmental Management, vol. 29, n. 5, pp. 1706-1721.
ASHRAF S., ALODAT A.Y., ZEITUN R.M.A. (2025), “The impact of board gender diversity on environmental innovation and the mediating role of the CSR committee”, Corporate Social Responsibility and Environmental Management, vol. 32, n. 3, pp. 3590-3601.
BARAIBAR-DIEZ E., D. ODRIOZOLA M. (2019), “CSR committees and their effect on ESG performance in UK, France, Germany, and Spain”, Sustainability, vol. 11, n. 18, p. 5077.
BEJI R., YOUSFI O., LOUKIL N., OMRI A. (2021), “Board diversity and corporate social responsibility: empirical evidence from France”, Journal of Business Ethics, vol. 173, n. 1, pp. 133-155.
BISWAS P.K., MANSI M., PANDEY R. (2018), “Board composition, sustainability committee and corporate social and environmental performance in Australia”, Pacific Accounting Review, vol. 30, n. 4, pp. 517-540.
CABRAL C., SASIDHARAN A. (2021), “Do regulatory mechanisms affect corporate social performance? Evidence from emerging economies”, Journal of Cleaner Production, vol. 326, p. 129383.
DE ABREU M.C.S., SOARES R.A., DANIEL‐VASCONCELOS V., CRISÓSTOMO V.L. (2023), “Does board diversity encourage an environmental policy focused on resource use, emission reduction and innovation? The case of companies in Latin America”, Corporate Social Responsibility and Environmental Management, vol. 30, n. 3, pp. 1161-1176.
DELLA CORTE G., RICCI F., SAGGESE S., SARTO F. (2025), “Does board industry expertise foster ESG strategy? The mediating role of environmental innovation”, Management Decision, vol. 63, n. 2, pp. 560-585.
DONG H., ZHANG C., TENG W. (2025), “Top management team heterogeneity and corporate ESG performance”, Finance Research Letters, vol. 73, p. 106610.
DOWLING J., PFEFFER J. (1975), “Organizational legitimacy: social values and organizational behavior”, The Pacific Sociological Review, vol. 18, n. 1, pp. 122-136.
DUQUE-GRISALES E., AGUILERA-CARACUEL J. (2021), “Environmental, Social and Governance (ESG) scores and financial performance of multilatinas: moderating effects of geographic international diversification and financial slack”, Journal of Business Ethics, vol. 168, n. 2, pp. 315-334.
DWEKAT A., SEGUÍ-MAS E., ZAID M.A.A., TORMO-CARBÓ G. (2022), “Corporate governance and corporate social responsibility: mapping the most critical drivers in the board academic literature”, Meditari Accountancy Research, vol. 30, n. 6, pp. 1705-1739.
ELSAYIH J., DATT R., HAMID A. (2021), “CEO characteristics: do they matter for carbon performance? An empirical investigation of Australian firms”, Social Responsibility Journal, vol. 17, n. 8, pp. 1279-1298.
ENDRIKAT J., DE VILLIERS C., GUENTHER T.W., GUENTHER E.M. (2021), “Board characteristics and corporate social responsibility: a meta-analytic investigation”, Business and Society, vol. 60, n. 8, pp. 2099-2135.
FINKELSTEIN S., D’AVENI R.A. (1994), “CEO duality as a double-edged sword: how boards of directors balance entrenchment avoidance and unity of command”, Academy of Management Journal, vol. 37, n. 5, pp. 1079-1108.
FREEMAN R. (1984), Strategic management: a stakeholder approach, Ballinger.
GARCÍA-MECA E., RUIZ-BARBADILLO E., MARTÍNEZ-FERRERO J. (2024), “High-quality assurance, ESG legitimacy threats and board effectiveness”, The British Accounting Review, p. 101385.
GIANNARAKIS G., MALLIDIS I., SARIANNIDIS N., KONTEOS G. (2023), “The impact of corporate governance attributes on environmental and social performance: the case of European region excluding companies from the Eurozone”, Business Strategy and the Environment, vol. 32, n. 6, pp. 3489-3512.
GOVINDAN K., KILIC M., UYAR A., KARAMAN A.S. (2021), “Drivers and value-relevance of CSR performance in the logistics sector: a cross-country firm-level investigation”, International Journal of Production Economics, vol. 231, p. 107835.
GUANGQI L., MAIZATULAKMA A., MOHAMAT S.H. (2024), “Board characteristics and ESG disclosure: a systematic literature review”, Asian Journal of Accounting and Governance, vol. 22, n. ??, pp. ??
HAFSI T., TURGUT G. (2013), “Boardroom diversity and its effect on social performance: conceptualization and empirical evidence”, Journal of Business Ethics, vol. 112, n. 3, pp. 463-479.
HAMBRICK D.C., MASON P.A. (1984), “Upper echelons: the organization as a reflection of its top managers”, The Academy of Management Review, vol. 9, n. 2, p. 193.
HARJOTO M., LAKSMANA I., LEE R. (2015), “Board diversity and corporate social responsibility”, Journal of Business Ethics, vol. 132, n. 4, pp. 641-660.
HU B., YANG L., LI Z. (2025), “Government environmental initiatives, managerial environmental attention, and corporate ESG performance: from the perspective of attention-based view”, Applied Economics Letters, vol. 32, n. 14, pp. 1986-1993.
HUSSAIN N., RIGONI U., ORIJ R.P. (2018), “Corporate governance and sustainability performance: analysis of triple bottom line performance”, Journal of Business Ethics, vol. 149, n. 2, pp. 411-432.
IOANNOU I., SERAFEIM G. (2012), “What drives corporate social performance? The role of nation-level institutions”, Journal of International Business Studies, vol. 43, n. 9, pp. 834-864.
ISLAM H. (2025), “Nexus of economic, social, and environmental factors on sustainable development goals: The moderating role of technological advancement and green innovation”, Innovation and Green Development, vol. 4, n. 1, p. 100183.
ISSA A., BENSALEM N. (2023), “Are gender‐diverse boards eco‐innovative? The mediating role of corporate social responsibility strategy”, Corporate Social Responsibility and Environmental Management, vol. 30, n. 2, pp. 742-754.
KARASAMANI I., MAGIDOU M., STYLIANOU I., CHRISTOFI M., TARBA S. (2026), “Industry‐specific CEO experience on boards and environmental innovation”, Corporate Governance: An International Review, vol. 34, n. 1, pp. 96-127.
KHAN M.K., ZAHID R.M.A., SALEEM A., SÁGI J. (2021), “Board composition and social & environmental accountability: a dynamic model analysis of Chinese firms”, Sustainability, vol. 13, n. 19, p. 10662.
KORCA B., COSTA E. (2021), “Directive 2014/95/EU: building a research agenda”, Journal of Applied Accounting Research, vol. 22, n. 3, pp. 401-422.
KWARTENG P., APPIAH K.O., ADDAI B. (2023), “Influence of board mechanisms on sustainability performance for listed firms in Sub-Saharan Africa”, Future Business Journal, vol. 9, n. 1, p. 85.
KYAW K., OLUGBODE M., PETRACCI B. (2017), “Can board gender diversity promote corporate social performance?”, Corporate Governance: The International Journal of Business in Society, vol. 17, n. 5, pp. 789-802.
LI L., XIA X.H., CHEN B., SUN L. (2018), “Public participation in achieving sustainable development goals in China: evidence from the practice of air pollution control”, Journal of Cleaner Production, vol. 201, pp. 499-506.
LIN C.-C., NGUYEN T.P. (2022), “Board attributes and corporate social responsibility performance: evidence from Vietnam”, Cogent Business and Management, vol. 9, n. 1, p. 2087461.
MARTINY A., TAGLIALATELA J., TESTA F., IRALDO F. (2024), “Determinants of environmental social and governance (ESG) performance: A systematic literature review”, Journal of Cleaner Production, vol. 456, p. 142213.
MATTEN D., MOON J. (2008), ““Implicit” and “explicit” CSR: a conceptual framework for a comparative understanding of corporate social responsibility”, Academy of Management Review, vol. 33, n. 2, pp. 404-424.
MINEV S., DANKOVA P., ŠTRUKELJ T. (2025), “Long-term effect of environmental, social, and governance (ESG) corporate practices on corporate stock performance”, Sustainability, vol. 17, n. 24, p. 11321.
NEKHILI M., BOUKADHABA A., NAGATI H. (2021), “The ESG-financial performance relationship: does the type of employee board representation matter?”, Corporate Governance: An International Review, vol. 29, n. 2, pp. 134-161.
NIELSEN S., HUSE M. (2010), “The contribution of women on boards of directors: going beyond the surface”, Corporate Governance: An International Review, vol. 18, n. 2, pp. 136-148.
OCASIO W. (1997), “Towards an attention-based view of the firm: attention-based view of the firm”, Strategic Management Journal, vol. 18, n. S1, pp. 187-206.
OCASIO W., LAAMANEN T., VAARA E. (2018), “Communication and attention dynamics: An attention‐based view of strategic change”, Strategic Management Journal, vol. 39, n. 1, pp. 155-167.
ODRIOZOLA M.D., BLANCO‐GONZÁLEZ A., BARAIBAR‐DIEZ E. (2024), “The link of ESG performance and board gender diversity in European firms”, Corporate Social Responsibility and Environmental Management, vol. 31, n. 6, pp. 5656-5669.
ORAZALIN N., MAHMOOD M. (2021), “Toward sustainable development: board characteristics, country governance quality, and environmental performance”, Business Strategy and the Environment, vol. 30, n. 8, pp. 3569-3588.
OUSSII A.A., JERIJI M. (2025), “Female directors’ representation and firm carbon emissions performance: does family control matter?”, Journal of Family Business Management, vol. 15, n. 3, pp. 517-533.
OYINLOLA B. (2025), “Do CEO and board characteristics matter in the ESG performance of their firms?”, Corporate Governance: The International Journal of Business in Society, vol. 25, n. 8, pp. 21-39.
PAPADOPOULOU V., KARAGIANNOPOULOU S., SARIANNIDIS N., GIANNARAKIS G. (2025), “Unmasking independent directors: corporate social responsibility strategy as a mediator of ESG controversies in European firms”, Corporate Social Responsibility and Environmental Management, p. csr.70217.
RIDGEWAY C. (1991), “The social construction of status value: gender and other nominal characteristics”, Social Forces, vol. 70, n. 2, p. 367.
SAIF-ALYOUSFI A.Y.H., ALSHAMMARI T.R. (2025), “Environmental sustainability and climate change: an emerging concern in banking sectors”, Sustainability, vol. 17, n. 3, p. 1040.
SHAHAB Y., NTIM C.G., CHEN Y., ULLAH F., LI H., YE Z. (2020), “Chief executive officer attributes, sustainable performance, environmental performance, and environmental reporting: New insights from upper echelons perspective”, Business Strategy and the Environment, vol. 29, n. 1, pp. 1-16.
SHAHBAZ M., KARAMAN A.S., KILIC M., UYAR A. (2020), “Board attributes, CSR engagement, and corporate performance: what is the nexus in the energy sector?”, Energy Policy, vol. 143, p. 111582.
SHAUKAT A., QIU Y., TROJANOWSKI G. (2016), “Board attributes, corporate social responsibility strategy, and corporate environmental and social performance”, Journal of Business Ethics, vol. 135, n. 3, pp. 569-585.
SIAKWAH P., MUSAVENGANE R., LEONARD L. (2020), “Tourism governance and attainment of the sustainable development goals in Africa”, Tourism Planning and Development, vol. 17, n. 4, pp. 355-383.
SVENSSON G., WAGNER B. (2015), “Implementing and managing economic, social and environmental efforts of business sustainability: Propositions for measurement and structural models”, Management of Environmental Quality: An International Journal, vol. 26, n. 2, pp. 195-213.
TAMAYO-TORRES I., GUTIERREZ-GUTIERREZ L., RUIZ-MORENO A. (2019), “Boosting sustainability and financial performance: the role of supply chain controversies”, International Journal of Production Research, vol. 57, n. 11, pp. 3719-3734.
UYAR A., KILIC M., KOSEOGLU M.A., KUZEY C., KARAMAN A.S. (2020), “The link among board characteristics, corporate social responsibility performance, and financial performance: evidence from the hospitality and tourism industry”, Tourism Management Perspectives, vol. 35, 100714.
WOOLDRIDGE J.M. (2019), Introductory econometrics: a modern approach (7th ed.). Mason, OH: Cengage Learning.
