Extreme weather and record-breaking heatwaves are no longer rare—they are becoming the norm. Most people now recognize the reality of climate change and accept that human activity plays a major role. This shift has reshaped priorities in the business world, where terms like corporate social responsibility (CSR) and environmental, social, and governance (ESG) have become common.

ESG, in particular, is now a key measure of how sustainably a company operates. A poor ESG score can damage a company’s reputation and make it harder to attract investors or secure loans. To avoid this, many businesses are eager to show they are becoming greener. Companies are switching to electric vehicles, building ships powered by hydrogen or ammonia instead of oil, and finding ways to cut energy use in factories. Reducing greenhouse gas emissions—especially CO2—can have a big impact on a company’s ESG score.

Successful change

But what helps a company succeed in making these changes? Research from NTNU Business School suggests that the answer may lie in how a company’s board is made up.

The study asked two key questions: Does diversity on a company’s board reduce carbon emissions? And how do internal board dynamics interact with outside factors, like government rules?

Earlier studies showed that board diversity can influence ESG performance. Companies with more women on their boards, for example, tend to be more transparent about their environmental impact. But the NTNU study took a closer look at what kinds of diversity matter most.

Challenging assumptions

The researchers analyzed data from 344 companies on the London Stock Exchange, covering a 17-year period from 2005 to 2021. Their findings challenge some common assumptions.

“We found that only diversity related to tasks and structure—like professional backgrounds and job roles—had a meaningful effect on reducing carbon emissions,” the lead researcher explained. Diversity in age, gender, or nationality had no clear impact on emissions. The study suggested that these types of diversity can sometimes create personal conflicts among board members, making the board less effective.

What did matter were factors like how long board members had served and whether they came from inside or outside the company. Boards that mixed insiders and outsiders, with varied levels of experience, tended to perform better.

Key external factors

The study also found that external factors, like carbon regulations, can make up for a lack of diversity on the board. Companies with less diversity in key areas may need stronger rules to drive change.

For shareholders, the message is clear: Focus on the right kinds of diversity when building boards. Look for members with different skills, professional backgrounds, and levels of experience. These traits are more likely to lead to effective decision-making.

Even so, demographic diversity—such as gender or nationality—still has value. “It can bring fresh ideas, encourage creativity, and improve a company’s reputation,” the researcher said. Other studies have linked boards with more women to greater use of renewable energy, though the evidence is mixed.

In the push to fight climate change, businesses need every advantage they can get. A diverse and skilled board can help companies navigate tough decisions and stay ahead of new regulations. As it turns out, diversity isn’t just good for public image—it’s good for the planet too.