Women in power can speed up sustainability transitions

There are many reasons to aspire for gender equality, but science has just provided another one. A new study published in the Journal of Corporate Finance argues that more women on board makes companies more sustainable. 

After studying 1,893 environmental lawsuits against US firms between 2000 and 2015, Chelsea Liu, a senior lecturer from the University of Adelaide, Australia, found that companies with more women on  the board receive fewer environmental lawsuits. In fact, “for every additional woman appointed to a corporate board, the company experienced an average 1.5% reduction in litigation risk.” says Dr. Liu.

As each environmental lawsuit costs companies on average 2.26% of their value on the market and the average capitalization for the affected companies was $204.3 million, that 1.5% reduction would have saved these companies $3.1 million for every woman on board. Thus, female directors are not only green, but may also improve companies financial performance, according to the researcher.

Lie points out to a number of possible factors to explain her findings. First, she mentions differences in ethical standards men and women tend to have due to the ways they are brought up. Men tend to be more often focused on power, while women are more likely to care about the common good. Another factor could be that gender-diverse teams usually produce better results. Finally, women are more likely to listen to others when making decisions, while men prefer to decide things on their own. As important decisions increasingly require diverse fields of expertise and in-depth knowledge of very particular subjects, listening to various expert opinions can become a valuable asset.

Curiously, in conditions of low gender diversity, fewer environmental lawsuits were received if women were CEOs. But when diversity increased, this didn’t matter so much anymore. According to Dr. Liu, “this shows that female chief executives and female directors have complementary roles in a boardroom”. The researcher warns, however, that we should not simply turn male-dominated contexts into female-dominated ones as more females than males on board would also lower gender diversity and might lead to the loss of certain other benefits.

Currently, at most globally dominant companies women are largely underrepresented in leadership positions. A decade ago Norway became the first country to make the share of women on companies’ boards below 40% illegal. Italy, France, Spain, Belgium and others now have gender quotas for high-power contexts. And, as things slowly start to change, we now have another “business case” for a faster transition to a more diverse and sustainable planet.