CEOs with high academic qualifications are more likely to pursue corporate decarbonisation than those who are lower qualified or educated, according to research by Durham University Business School.
The study, which explored the link between CEO power and industrial decarbonisation efforts also found that the more power a CEO holds the more likely they are to tackle carbon emissions. Another key motivator for green action was diversity, with the study revealing that having boards with members from different countries, and a range of ages helps to encourage CEOs to clamp down on carbon emissions more quickly.
The research, conducted by Anthony Kyiu, Assistant Professor in Finance at Durham University Business School, alongside his colleagues; Frank Obenpong Kwabi, from De Montfort University, and Gbenga Adamolekun, from Edinburgh Napier University, investigated almost 900 firms, spread across 26 different countries over a 20-year period (2000-2021).
The researchers focused on firm-level governance data across this period, as well as financial data on all firms, greenhouse gas emissions, and the level of CEO compensation.
In doing so, the researchers found that whilst CEOs that were highly-educated were the most likely to act to reduce corporate emissions, CEOs with the greatest power were also amongst the most likely to invest in decarbonisation efforts.
The researchers suggest that whereas the motivation for higher-educated CEOs might lie in their own knowledge and foresight on the need to act more sustainably, CEOs with strong power over their organisations were focused on reducing carbon emissions due to the fact that their financial remuneration is closely linked to company performance. With companies who are pushing towards net-zero being more attractive to investors, CEOs have a greater incentive to decarbonise.
“Companies consume a significant amount of fossil fuels, which has resulted in growing pressure from environmental activists and green investors for firms to reduce their carbon emissions” says Professor Kyiu.
“Notably, about 100 firms are estimated to be responsible for 71 % of global carbon emissions, if companies gave these CEOs greater power, and tied their financial incentives to decarbonisation, we could see a huge increase in the reduction of carbon emissions globally.”
The researchers reiterate that decarbonisation of firms can have a positive financial impact on firms, thus CEOs who have the power to do so are actively pursuing a decarbonisation strategy – not only is it good for the firm, but it is good for their own progression and for society too.
