Board Environmental Committee and Gender Diversity: Substitutes or Complements for Corporate Carbon Emissions?

Abstract

ABSTRACT This study examines firstly the association between board environmental committees (BECs) and corporate carbon emissions (both direct and indirect forms) among publicly listed European Union firms, and secondly, whether board gender diversity (BGD) acts as a complementary or substitutive governance mechanism. Using a panel dataset of 496 firms over the period 2013–2023, we employ a comprehensive empirical analysis including OLS, fixed‐effects, Generalised Method of Moments (GMM), Two‐Stage Least Squares (2SLS), and Propensity Score Matching (PSM) to address potential endogeneity concerns. Our findings show that both BECs and BGD are independently associated with significantly lower both direct (Scope 1) and indirect (Scope 2) corporate carbon emissions. However, the interaction between BECs and BGD is positive and statistically significant, indicating a substitutive rather than complementary relationship. Grounded in agency and Critical Mass theories, we explain this substitution effect through two forms of governance overlap: ‘cognitive overlap’, whereby gender‐diverse boards already incorporate stakeholder‐oriented and environmentally sensitive monitoring perspectives, and ‘formal overlap’, whereby environmental oversight responsibilities become duplicated across board structures. Such overlapping governance structures may generate process losses or, in extreme cases, redundancy, and reduce the marginal effectiveness of additional monitoring mechanisms. Specifically, once gender diversity approaches a critical mass threshold, the board itself may internalise many environmental monitoring functions that are typically delegated to specialised environmental committees. Consequently, the incremental governance value associated with a dedicated BEC appears to diminish. These findings challenge the prevailing ‘more‐is‐better’ approach to ESG governance by suggesting that effective climate governance depends less on accumulating governance mechanisms and more on strategically aligning board oversight structures. We, therefore, contend that firms may adopt a ‘Lean Green Governance’ framework in which firms tailor sustainability governance structures consistent with existing board diversity and environmental expertise rather than adopting overlapping monitoring mechanisms.