Friedman doctrine prevails! Or does it? Evidence from the views of practitioners on corporate sustainability in their firms

Abstract

The purpose of this paper is to provide insights on the views of firms regarding corporate sustainability (CS) and how the structure of the board affects this. We surveyed the CEOs, CFOs and Environment Officers of about 860 Swedish firms affected by mandatory sustainability reporting after the implementation of the EU Directive 2014/95/EU. The six-transcending ambition levels (namely: pre-CS, compliance-driven, profit-driven, caring, synergistic, and holistic) of corporate sustainability proposed by van Marrewijk & Werre (2003) were used to classify the views of key officers on the sustainability agenda of their respective firms. We find that the drive by firms for higher CS ambition levels is positively influenced by a diverse board (i.e., representation of female board members), and the effect is more pronounced if the board is constituted with a female top executive. Moreover, younger top executives are more likely to have a higher CS ambition level. On the other hand, external CEOs, external board members, and forceful disclosure of sustainability activity (e.g., EU Directive 2014/95/EU) do not significantly influence CS ambition levels, whereas firm size and industry affiliation do. Our findings are useful for top managers and regulators interested in corporate governance issues and influencing the sustainability efforts of their firms. Methodologically, the use of a survey method is an extension to an otherwise high reliance on archival research in the field of CS. Furthermore, the dataset is unique, and the results are robust to various sensitivity analyses.