How can ESG aspects be measured?

According to the authors, ESG aspects are measured using a variety of indicators and approaches, aiming to provide a holistic view of a company's commitment to sustainable and ethical operations, going beyond traditional financial metrics.

ESG indicators used in the literature range from measuring the volume of ESG information that companies publicly report, up to assessing ESG performance using ratings and scores provided by databases that assess a company's environmental impact, social responsibility, and governance quality.

  What do these findings imply for companies?

The existing literature indicates that firms which proactively integrate specific governance mechanisms tend to exhibit superior ESG outcomes. In particular, empirical evidence demonstrates that:

• The inclusion of female directors contributes positively to both the breadth and depth of ESG disclosures and performance metrics.
• Active stewardship by pension and asset‐management funds, principally through voting rights and shareholder proposals, exerts meaningful pressure on management to elevate ESG standards.
• A higher proportion of truly independent directors correlates with more rigorous monitoring of sustainability initiatives and reduced incidence of ESG controversies.
• Tying executive remuneration to quantifiable ESG targets fosters managerial accountability for long-term stakeholder value creation.
• The establishment of board‐level committees focused exclusively on ESG matters enhances strategic coherence and operational follow-through on sustainability objectives.
• Executive profiles that emphasize long-term orientation and stakeholder inclusivity are associated with more robust ESG performance.

Conversely, concentrated family ownership can attenuate these benefits, often by entrenching power structures that detract from transparent, stakeholder-oriented decision‐making . Collectively, these findings underscore the strategic imperative for corporates to reconceptualize governance frameworks—moving beyond mere compliance toward governance architectures that actively drive sustainable competitive advantage.

  How can research on this topic be further advanced?

While there has been notable progress in understanding the link between corporate governance and ESG performance, there is still much to explore. The researchers suggest several areas to further enrich this field:

• Extend empirical analyses beyond European contexts to incorporate North American, Asian, and emerging‐market settings, thereby capturing the influence of divergent regulatory regimes and governance conventions .
• Investigate under‐studied dimensions such as board members’ ESG‐specific expertise and the effects of CEO tenure on the formulation and execution of sustainability strategies.
• Incorporating interviews, case studies, and mixed research approaches can help understand the day-to-day decision-making processes in companies.
• Broaden the scope to include SMEs and financial‐sector entities, which face distinct governance structures and ESG imperatives compared to large, publicly traded firms.
• Using methods that can better establish cause-and-effect relationships, such as comparing periods before and after regulatory changes, can strengthen the evidence linking governance reforms to improved ESG outcomes.

By exploring these areas, researchers can provide more detailed and context-specific insights, helping both scholars and industry leaders develop more effective and sustainable governance practices.

  The authors