The effectiveness of board gender diversity and sustainability committees in mitigating ESG controversies

PurposeThis study aims to examine the impact of board gender diversity (BGD) and sustainability committees (SC) on environmental, social and governance (ESG) controversies, aiming to assess the effectiveness of these governance mechanisms in mitigating ESG risks.Design/methodology/approachThe study used panel data from 2,812 nonfinancial US publicly listed firms between 2018 and 2023. To ensure robust results, various estimation techniques were used, including alternative measures, the Heckman two-stage model to address potential self-selection bias and the two-stage least squares method to tackle endogeneity concerns.FindingsThe results indicate that both BGD and SC negatively and significantly impact ESG controversies. Firms with greater gender diversity on their boards and established SC are less likely to face ESG controversies. In addition, the study found that the interaction effects of BGD and SC are more effective in reducing ESG controversies than either mechanism alone.Practical implicationsFirms that prioritize gender diversity on their boards and have active SCs manage ESG risks more effectively. Investors should consider these factors when evaluating potential investments, as such firms are likely to offer better long-term performance and stability. By focusing on firms with strong ESG practices, investors can mitigate risks associated with ESG controversies and enhance the overall resilience of their investment portfolios.Social implicationsBy highlighting the role of gender-diverse boards and SC in mitigating ESG controversies, this study supports broader societal goals of gender equality and responsible business conduct. This aligns with sustainable development goal (SDG) 5 (gender equality) by advocating for increased female representation in leadership roles and SDG 12 (responsible consumption and production) by encouraging sustainable practices in business operations.Originality/valueThis study provides new insights into the effects of BGD and SC on ESG controversies, offering valuable guidance for policymakers and business leaders seeking to enhance corporate governance and sustainability.