Focused engagement or holistic governance: Strategies for higher ESG scores – A configurational study on the governance and strategic choices for ESG success

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Journal Title

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Volume Title

School of Business | Master's thesis

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Date

2025

Department

Laskentatoimen laitos

Major/Subject

Mcode

Degree programme

Accounting

Language

en

Pages

75+12

Series

Abstract

This thesis aims to recognise different configurations of strategic and governance attributes that companies can implement to improve their ESG (environmental, social and governance) scores. The study is done on a sample of 70 North American industrial sector companies. Companies on the industrial sector are under pressure to improve their sustainability commitment and performance, as the sector is one of the main corporate contributors to climate change. The study is done using the fuzzy-set Qualitative Comparative Analysis (fsQCA) approach, which is a configurational study methodology combining both quantitative and qualitative study techniques. It recognises how the corporate governance and strategic attributes used in this thesis interact with each other and the different bundles which lead to higher ESG scores. Five explanatory conditions are used as variables in the study: structural diversity (gender and ethnic diversity), effective attendance (board size and board meeting attendance), board control (number of independent directors and CEO power), CSR focus (presence of CSR committee and CSR reporting), and R&D intensity. The main analysis finds two configurations that are consistently linked with high ESG scores: the first strategy, named focused engagement strategy, has CSR focus and effective attendance present and structural diversity as an absent condition. The second strategy is named holistic governance strategy, as it is more comprehensive, having four out of the five conditions present. In addition, several sub-analyses are made. First, a score for ESG specialisation is calculated, based on whether the companies concentrate on all of the ESG pillars equally or specialise only in one of them. Two configurations are found to be linked with high ESG specialisation. Moreover, a sub-sample analysis is conducted dividing the sample by firm size. The findings contribute to the research on the influence that governance characteristics have on sustainability and offers a configurational perspective to the question.

Description

Thesis advisor

Sinha, Vikash

Keywords

ESG, sustainability, corporate governance, fsQCA, configurational study

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Citation

Permanent link to this item

https://urn.fi/URN:NBN:fi:aalto-202502182465

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[gradu] Kauppakorkeakoulu / BIZ