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Environmental Background Directors and ESG Performance: A Perspective on Green Governance

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  • Chuyao Deng

    (School of Business, Macau University of Science and Technology, Taipa, Macao 999078, China
    School of Business, Hunan University of Humanities, Science and Technology, Loudi 417000, China)

  • Wenliang Peng

    (Complex Environment Sensing Center, Beijing Institute of Technology (Zhuhai), Zhuhai 519000, China)

  • Zhenjiang Dou

    (School of Business, Hunan University of Humanities, Science and Technology, Loudi 417000, China)

  • Qidi Zhang

    (School of Business, Macau University of Science and Technology, Taipa, Macao 999078, China)

Abstract

ESG has gradually become a key indicator to measure the corporate sustainable development performance in various countries. More and more business managements are integrating sustainable development goals into corporate strategies. The board of directors is the strategy and decision maker of the enterprise and has the primary responsibility for ESG governance. The green governance of the board of directors is an important guaranteed mechanism to promote ESG performance. We use text analysis to identify environmental background directors (EBDs) and analyze the impact and mechanisms of EBDs on ESG performance, drawing on data from Chinese-listed companies between 2010 and 2022. The results indicate that EBDs significantly enhance overall corporate ESG performance at the 1% level. Specifically, EBDs significantly improve social (S) performance at the 1% level and environmental (E) and governance (G) performance at the 5% level. Mechanism analysis finds that EBDs enhance ESG performance by fostering management’s green awareness and promoting the enterprise’s green innovation. Heterogeneity analysis shows that EBDs have a greater impact on green governance in regions with weak environmental regulation, cleaning industries, and after the implementation of the New Environmental Protection Law. Our findings contribute to the literature on factors influencing ESG performance and green governance. They also provide novel empirical evidence supporting the selection and cultivation of directors with environmental backgrounds, enhancing board diversity and fostering corporate sustainable development.

Suggested Citation

  • Chuyao Deng & Wenliang Peng & Zhenjiang Dou & Qidi Zhang, 2024. "Environmental Background Directors and ESG Performance: A Perspective on Green Governance," Sustainability, MDPI, vol. 16(23), pages 1-22, December.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:23:p:10559-:d:1534888
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    References listed on IDEAS

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