The impact of sustainability committee characteristics on corporate sustainability performance: Evidence from the FTSE 150 non-financial companies

Abstract

Following considerable business and academic interest in sustainability over the last two decades, this study’s aim was to extend previous research by examining through the lens of stakeholder theory, Resource Dependence Theory (RDT) and legitimacy theory: through (1) the impact of sustainability committee characteristics (SCC) on Corporate Sustainability Performance (CSP) and (2) any significant differences between findings when focused and non-focused sustainability committees are compared. This thesis applied positivist methodology and adopted fixed effects regression models on a sample of 112 non-financial companies from FTSE 150 for the period 2010-2018. Environmental, Social and Governance (ESG) data was gathered from the Refinitiv database along with data on sustainability committee characteristics collected from Fame database, companies’ annual reports and London Stock Exchange (LSE). The main findings show a positive and significant relationship between organisational factors including firm size, profitability and firm age with Environmental and ESG scores. There is also a positive and significant association between frequency of committee meeting and age diversity with Governance scores only. The empirical finding shows these positively significant relationships under the presence of focused and non-focused committees equally. Additionally, the results show that only social and governance sustainability performance significantly improved from 2016 following the Paris Agreement of 2015 and the publication of the 2030 SDGs. Furthermore, the findings revealed the frequency of committee meetings is negatively and statistically significantly related to the Environmental dimension. The finding shows that firms focused/non-focused committees with greater independent members tend to have a statistically negative relationship to Governance Sustainability Performance. Importantly this research study also provides empirical evidence of the insignificant relationship of independent variables on the sub-dimension of Social Performance, thus, this finding supports the argument that firms act by greenwashing. This study has evidenced that no single theory provides a rationale for how SCCs influence CSP and its conclusions include suggestions for academics as well as businesses in terms of ongoing development and research.