The Boardroom’s Influence on ESG Transparency

Clear and reliable environmental, social, and governance (ESG) disclosure has become essential for long-term corporate success. Investors rely on it to assess risk, regulators use it to set expectations, and stakeholders increasingly see it as a sign of responsible and future-oriented leadership. As sustainability climbs to the top of strategic priorities, companies are working to understand what drives effective and credible ESG reporting. Despite significant investments in disclosure practices, the factors that influence reporting quality often remain unclear. However, research from Associate Professor Sana Mohsni shows that the groundwork for impactful reporting is laid long before drafting begins. It truly begins in the boardroom.

Analyzing data from 2010 to 2021, Sana (and one of her PhD students, Amar Benaissa) investigated why some firms listed on the Toronto Stock Exchange (TSX) disclose stronger ESG information than others. After examining 1,976 firm-year observations from Bloomberg and Refinitiv, a clear pattern emerged: the presence of female board members. Firms with a higher proportion of women on their boards tend to be more transparent about their ESG practices.

This pattern is visible across all three pillars of ESG disclosure. It is most prominent in environmental reporting, followed by social and then governance. More specifically, firms with more women directors tend to perform better on measures related to Workforce and Human Rights. These include ethical labour practices, employee well-being, and broader commitments to social responsibility, showing how board composition influences both what companies disclose and how they act.

The study also highlights significant differences across sectors. The link between women’s representation on boards and better ESG disclosure is particularly evident in industries such as Consumer Staples, Consumer Discretionary, Energy, and Real Estate. These sectors often face increased public scrutiny or encounter greater environmental and social risks, making transparent communication particularly important. These findings show why having a diverse board is even more essential in industries where strong ESG reporting is crucial.

However, having only one woman on a board is insufficient, as it does not significantly alter reporting behaviour. A critical mass effect is necessary, meaning impact becomes noticeable only when at least three women serve as directors. This finding offers clear, actionable guidance for organizations and policymakers aiming to improve the quality of their sustainability reporting. Genuine representation enables women directors to participate fully in discussions, influence decisions, and shape reporting practices in meaningful ways.

This work has gained widespread recognition and was showcased at prestigious events such as the Administrative Sciences Association of Canada Conference (ASAC) and the Global Initiative for Governance and Sustainability Symposium, where it received a Best Paper Award. The research also engaged audiences at the Climate and Energy Finance Group Conference and the Massey Sustainable Finance Conference.

This project offers impactful, practical insights amid an evolving landscape of governance and sustainability in Canada. With the help of her team of PhD students, Sana’s research shows that board diversity extends beyond equity goals, acting as a key driver for improved disclosure, transparent communication, and responsible corporate practices. By applying these insights, organizations can build leadership teams that promote transparency and support sustainable long-term success.