The role of board composition in shaping ESG performance: a focus on directors’ sustainability experience and age

In the contemporary corporate landscape, the imperative of sustainability has grown exponentially. This study aims to illuminate the pivotal role of corporate governance in bolstering firm sustainability, transcending conventional analyses centered on observable board characteristics. Instead, our research delves into the subtler realm of board sustainability experience, investigating its influence on the sustainability performance of firms. Notably, we explore how the age of board members can act as a moderating factor in this relationship. Employing propensity score matching and panel regression techniques, we scrutinized data from 510 European listed companies spanning the years 2014 to 2020. Our investigation uncovers a significant dependency between the effectiveness of board sustainability experience and the age of the board. The findings reveal a remarkable paradox: younger boards amplify the positive impact of sustainability experience, whereas this effect takes a negative turn within the context of older boards. This research offers multifaceted insights. Firstly, it underscores the interplay between board sustainability experience and board age. Secondly, it highlights the vital need for companies to consider the age composition of their boards in conjunction with sustainability experience when striving for enhanced sustainability outcomes. Moreover, our study provides practical guidance for director recruitment strategies, emphasizing the importance of balancing age diversity with sustainability expertise. Furthermore, these findings hold substantial implications for regulatory policy development. The evolving corporate landscape demands regulatory frameworks that not only encourage sustainability expertise within boards but also acknowledge the moderating influence of board age. Policies should be tailored to foster a dynamic blend of board members, aligning their collective experience and age composition with sustainability objectives. In sum, this research sheds light on the complex dynamics between board sustainability experience, board age, and firm sustainability performance. It prompts a reevaluation of corporate governance practices, emphasizing the necessity of holistic approaches to board composition and the imperative of adaptability in the pursuit of sustainable corporate futures.