Boardroom Diversity and Environmental Management Teams in Corporate Water Disclosure: Complementary or Substitutable Roles?

Abstract

The United States, as a leading industrial water consumer, faces substantial economic risks from water-related challenges, with projected GDP losses of $3.7 billion by 2050. Corporate water disclosure (WD) has emerged as a pivotal strategy to mitigate these risks. However, the interplay between corporate governance mechanisms in promoting WD remains underexplored. This study addresses this gap by investigating the impact of two key governance mechanisms—board gender diversity (BGD) and the establishment of an environmental management team (ETeam)—on WD. Using a panel of 80 U.S.-listed companies in WEF sectors from 2015 to 2022 and employing a random-effects logistic regression model, we find that both BGD and ETeam independently promote WD, but function as substitutable mechanisms: the effectiveness of one diminishes in the presence of the other. Several robustness checks, including alternative model specifications and estimation approaches, confirm the consistency of our results. These findings suggest that firms may optimize governance design by prioritizing either BGD or ETeam to enhance WD, rather than investing in both simultaneously. This study contributes to the literature on corporate water governance and provides actionable insights for firms and policymakers addressing water-related risks. More broadly, we advance the ongoing debate on the interaction between governance mechanisms and environmental (specifically water-related) performance, underscoring the importance of a coherent and well-aligned governance framework in fostering effective water transparency.