According to new research, companies with gender-balanced boards are better for the environment. But why?
There are many obvious reasons why organisations should strive for diversity at their most senior levels – the most glaring being that white, middle-class, cisgender, heterosexual men should not automatically have a monopoly on wealth, power and influence.
But hiring people with a wide range of identities and backgrounds is also beneficial to companies themselves. Extensive research has shown that groups that are diverse in terms of gender, race, ethnicity and sexual orientation tend to be more innovative and better at problem-solving, while a 2016 study by Credit Suisse bank showed that companies with women on their board outperformed those whose boards were filled only with men. Another study done at MIT found that mixed-gender teams were more productive and creative.
In other words, employing more people who aren’t white, middle-class, cisgender, heterosexual men doesn’t just benefit those people alone. Crazy, right?
Now, we can add the findings of a new study to the long list of reasons why companies should hire more women. The research, recently published in the Journal of Corporate Finance, shows that companies with a more balanced mix of men and women on their board of directors are more likely to be run in an environmentally-friendly way – so they’re good news for gender equality and for the planet.
The study was conducted by Dr Chelsea Liu, senior lecturer at the University of Adelaide in Australia. After examining almost 1,900 environmental lawsuits brought against 1,500 firms in the US between 2000 and 2015, she found there were direct links between gender diversity and corporate environmental violations.
Individuals, organisations and even cities and states can sue corporations in the US if they believe those corporations have violated environmental law. Examples of this type of lawsuit in recent years include a 2014 case where an environmental campaign group sued an electricity company in Texas over the amount of pollution one of its plants was creating, or the attempt by the cities of Oakland and San Francisco last year to sue large fossil fuel companies for damages related to climate change.
Liu discovered that companies with greater gender diversity on their boards had to fight significantly fewer environmental lawsuits that those with boards that were predominantly or entirely male. This suggests that female directors help reduce the chances of a company being sued for violating environmental law.
“Having a range of perspectives can result in improved corporate environmental policy, which in turn can reduce exposure to environmental lawsuits,” says Liu.
“Gender socialisation and ethics theories suggest that girls are brought up to be more caring towards others which can enhance environmental decision-making in the boardroom.”
Previous research has shown that female executives are “less overconfident and more willing to seek expert advice than their male counterparts,” Liu adds. This tendency to consult experts could also contribute to the reduction in gender environmental lawsuits experienced by gender-diverse companies.
Liu’s research shows that for every woman added to a board of directors, the average exposure to environmental lawsuits drops by 1.5%, which could save companies around $3.1 million (£2.4 million).
However, she points out that it is gender diversity that’s most crucial on boards of directors, not necessarily having more women than men.
“Gender diversity is what’s important – female representation on boards is most important where the CEO is male, and less important if the CEO is female,” she says.
“This can be attributed to diversity theory, which says that a group of people from more diverse backgrounds – gender, race etc. – tend to make better collective decisions, because they canvas a wider range of perspectives.”
Want simple tips on how to make your life more eco-friendly? Find them here.
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