CEOs with high academic qualifications are more likely to pursue corporate decarbonisation than those with lower levels of education, 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 of Finance, alongside his colleagues; Frank Obenpong Kwabi (De Montfort University) and Gbenga Adamolekun (Edinburgh Napier University), investigated almost 900 firms, spread across 26 different countries over a 20-year period (2000-2021).
The researchers analysed firm-level governance data, financial data, greenhouse gas emissions, and levels of CEO compensation during this period.
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 their financial remuneration being 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.
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