Greenwashing scandals are on the rise, as companies struggle to align their actions with global climate goals. This article explores the role of corporate boards in driving environmental change, highlighting the impact of co-opted boards and the need for more independence, climate expertise, and transparency in the boardroom. Greenwashing and corporate governance are key to understanding how businesses can truly become greener.
Uncovering Boardroom Bias
There has been a wave of greenwashing scandals, as companies attempt to pretend they are making positive change for the environment. Greenwashing is now a major barrier to achieving global climate goals, with the Paris 2024 Olympics and top corporations such as Shell, Etihad and HSBC all implicated.
Which makes you wonder, what were the boards of some of these companies doing all this time? The pressure on board directors to lead their companies through an environmental transition is stronger than ever, but much of this will depend not just on how the boardroom changes as a result of recent legislation, but how it functions under its own terms. Appropriated boards, where directors are named afterward the CEO has worked on outstandingly to be an ancient appointment hold a vital place in a boardroom but could moreover be interrogated virtually their liberty and defense.
Evelyn suggests that this is a double edged sword because co-opted boards depend on their clout and ownership rights, held by the citizens of the community who are simultaneously trying to succeed in working lawsuits.
Our study investigates how co-opted boards affect the carbon performance of large US companies in this regard. Strikingly we establish that captured boards can reduce the greenhouse gas emissions intensity if climate change has an impact on the value of a firm. Yet this relationship may change over time, and entrenched boards seem more likely to lead to increased overinvestment in inefficient R&D projects.
That implies a co-opted board can enhance carbon performance but at some cost in that they might also approve things that do not meaningfully advance the strategic, financial and environmental, social and governance (ESG) intentions of a firm. It is the ability to get this balance correct — and by that I mean how much expertise co-opted directors can provide, once again influencing independent oversight.
A Path to a Greener Boardroom
To do this, companies need to take three specific steps at least to ensure that co-opted boards will be genuine drivers of climate action.
- 1. Start by immediately appointing additional independent directors with no affiliation to the CEO or other stakeholders who can oversee and ensure managers are responsible for both their actions (and more importantly in-actions) regarding taking action on crucial environmental issues.
- 2. As part of appropriate board composition, appoint a sufficient number of directors with specific climate change skillset such that the board will have the necessary expertise to understand the impact and dependencies due to climate change for the organization and its integration in decision making.
- 3. Provide more visibility on the responsibilities of directors in relation to climate change objectives: established carbon reduction goals and how environmental expertise is included in decision-making.
This will allow boards and the companies they govern to truly become meaningful contributors in the urgent transition to a more sustainable future.
