Jurnal 3

Utilities Policy 82 (2023) 101549
Contents lists available at ScienceDirect
Utilities Policy
journal homepage: www.elsevier.com/locate/jup
Full-length article
Worldwide evidence of corporate governance influence on ESG disclosure

in the utilities sector
Giuseppe Nicolo a, *, Giovanni Zampone b, Giuseppe Sannino b, Adriana Tiron-Tudor c
a
Management and Innovation Systems Department, University of Salerno, Via Giovanni Paolo II, 132 84084, Fisciano, SA, Italy
b
Department of Economics, University of Campania “Luigi Vanvitelli”, Corso Gran Priorato di Malta, 81043, Capua, CE, Italy
c
Faculty of Economics and Business Administration, Babes-Bolyai University, Strada Teodor Mihali, Nr. 58-60, Campus FSEGA, 400591, Cluj-Napoca, Romania
A R T I C L E I N F O A B S T R A C T
Handling Editor: Janice A. Beecher This paper examines the impact of corporate governance mechanisms on Environmental Social and Governance
(ESG) disclosure in the utilities sector. We collected data from the Eikon Refinitiv database on 265 worldwide
Keywords: organisations operating in the utility sector during the 2011–2019 period.
Utilities Findings evidence that board independence and the existence of a specific Corporate Social Responsibility
ESG disclosure
(CSR)/sustainability committee constitute positive drivers of utilities’ overall ESG disclosure levels. Also, board
Corporate governance
size positively influences environmental and social disclosure.
The study would encourage utilities to define their internal corporate governance mechanisms carefully,
devoting primary attention to an accurate selection of the board of directors members.
1. Introduction impacts (Paolone et al., 2021; Slacik and Greiling, 2020). ESG Reporting
has been fostered by the action of standard-setters like the Global
In recent years, stakeholders have started to put mounting pressure Reporting Initiative (GRI), which, since 1997, has dominated the scene
on companies to receive more information on the positive and negative of ESG reporting, and the progressive shift from voluntary to mandatory
impacts exerted by their environmental and social actions and the extent reporting regimes prompted by the action of policymakers and culmi
to which they incorporate sustainable development into their strategies nating in the recent adoption of the Corporate Sustainability Reporting
and business models (Accountancy Europe, 2019; Camilleri, 2022; Directive (CSRD) in the European Union (EU) in 2022 (Christensen
KPMG, 2022). Attuned to this, the way investors and financial analysts et al., 2021; Pizzi et al., 2021; KPMG, 2022). As KPMG (2022) observed,
decide to allocate their capital has changed. They have started to attach the number of firms involved in non-financial reporting practices has
growing relevance to Environmental, Social and Governance (ESG) in progressively increased: 96% of G250 and 79% of N100 companies
formation1 better to assess companies’ risk profiles and future cash flows currently report on ESG matters.
as well as to price investments with higher accuracy (Ernst and Young Nevertheless, although the academic literature on ESG reporting is
(EY), 2020; Christensen et al., 2021; Veltri et al., 2023). This trend was mature, many scholars have converged on the need to devote more
confirmed by a recent survey by Ernst and Young (EY), highlighting that attention to exploring sectorial dynamics (e.g. Slacik and Greiling, 2020;
98% of investors surveyed used non-financial disclosure to evaluate Eng and Fikru, 2022; Imperiale et al., 2023). In particular, despite their
corporate non-financial performance, with 72% conducting a struc nature as environmentally sensitive industries (Freedman and Stagliano,
tured, methodical evaluation (Ernst and Young, 2020). 2008; Shima and Fung, 2019; Garcia-Meca and Martinez-Ferrero, 2021),
As sustainability concerns become increasingly relevant to society utilities still represent an under-investigated field in the context of ESG
and capital markets, ESG reporting has become an institutionalised reporting (Slacik and Greiling, 2020; Eng and Fikru, 2022). Prior studies
practice to meet emergent investor, and other stakeholder information have investigated individual dimensions of utilities’ ESG reporting (e.g.
needs about corporate activities’ economic, environmental and social climate, carbon or environmental disclosure) (e.g. Freedman and
* Corresponding author.
E-mail addresses: [email protected] (G. Nicolo), [email protected] (G. Zampone), [email protected] (G. Sannino), Adriana.
[email protected] (A. Tiron-Tudor).
1
Mainstream literature largely treats the terms ESG, CSR, Sustainability and non-financial information disclosure as synonyms (Christensen et al., 2021; Aluchna
et al., 2023).
https://doi.org/10.1016/j.jup.2023.101549
Received 24 December 2022; Received in revised form 27 March 2023; Accepted 27 March 2023
Available online 13 April 2023
0957-1787/© 2023 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
G. Nicolo et al. Utilities Policy 82 (2023) 101549
Stagliano, 2008; Bahari et al., 2016; Stanny, 2018; Talbot and Boiral, Eikon’s database on a sample of 265 worldwide organisations operating
2018); or examined the relationship between sustainability disclosure in the utilities sector (i.e., providers of electricity, natural gas, and water
and performance (Freedman and Jaggi, 2004; Shima and Fung, 2019; and related services, independent power producers, and multi-line)
Eng and Fikru, 2022; Imperiale et al., 2023). However, there is a limited during the 2011–2019 period, resulting in a total of 1750 observa
understanding of how utilities respond to investor and other stakeholder tions. Accordingly, several Tobit regressions for panel data models were
information needs across all the ESG corporate dimensions. Addition estimated to test the association between five main corporate gover
ally, there is still much to learn about the potential drivers of utilities’ nance attributes (board size, board independence, board gender di
ESG disclosure. versity, Chief Executive Officer (CEO) duality; and board CSR/
The utilities sector represents a valid framework of study from the sustainability committee) and both individual and aggregate ESG
ESG reporting perspective as it includes companies mainly involved in disclosure scores.
providing essential public infrastructure and services like the generation This paper provides manifold contributions to the existing literature.
and distribution of electricity, natural gas and water and the collection First, it extends ESG disclosure research focusing on an environmentally
and treatment of waste for communities serving both citizens and sensitive industry such as the utilities sector. Second, prior disclosure
companies (Traxler and Greiling, 2019; Giacomini et al., 2020; Ligorio research in the utilities context concentrates mainly on the sub-sector of
et al., 2022; Veltri et al., 2023; Venturelli et al., 2023; Valenza and energy (e.g. Talbot and Boiral, 2018; Traxler and Greiling, 2019; Slacik
Damiano, 2023). However, the nature of utilities’ value-creation pro and Greiling, 2020) and is prevalently country-based (e.g. Freedman and
cesses also involves the production of adverse impacts on the ecosystem, Jaggi, 2004; Freedman and Stagliano, 2008; Shima and Fung, 2019;
such as climate change, pollution, biodiversity loss, ozone depletion and Giacomini et al., 2020; Paolone et al., 2021; Eng and Fikru, 2022). So,
a reduction in natural resources (Talbot and Boiral, 2018; Slacik and this study expands the findings of prior studies generating comparative
Greiling, 2020; Imperiale et al., 2023). Accordingly, utilities’ core pro insight from a sample of firms operating worldwide in different
cesses are characterised by the coexistence of both positive and negative sub-sectors of the utilities industry. Third, previous studies focused on
externalities (Bresnihan, 2016; Traxler and Greiling, 2019; Imperiale individual dimensions of non-financial disclosure (e.g. carbon, climate
et al., 2023). For these reasons, utilities are considered environmentally or environmental information) provided by utilities and rarely investi
sensitive industries subject to multiple and somewhat conflicting insti gated its determinants. In particular, little is known about the extent to
tutional logics (Freedman and Stagliano, 2008; Shima and Fung, 2019; which corporate governance mechanisms influence utilities’ ESG
Traxler and Greiling, 2019). They should combine the need to create disclosure. Hence, this paper provides novel empirical evidence, shed
economic value for shareholders with public value for society and the ding light on how key internal corporate governance mechanisms affect
community, moving within social and environmental constraints. As a ESG disclosure levels of utilities.
result, disclosing ESG information is particularly critical so that utilities The remainder of the paper is organised as follows. The next section
respond to institutional and stakeholder pressures and preserve the provides an overview of prior research on ESG disclosure within the
legitimacy of their operations, demonstrating an active commitment to context of utilities. Then the broader theoretical background informing
contribute to the societal transition toward sustainable development the paper’s analysis is presented, and related hypotheses are outlined.
(Traxler and Greiling, 2019; Ligorio et al., 2022; Imperiale et al., 2023; The third section explains the research methodology, including sam
Valenza and Damiano, 2023; Veltri et al., 2023). Thus, considering that pling and data analysis. The fourth section offers and discusses the main
sustainability has become a core part of modern society’s value system, findings and additional analysis. Last, the sixth section presents con
ESG disclosure represents an inescapable way for utilities to point out clusions, implications, and limitations and suggests future avenues for
the conformity of their behaviours with emerging societal expectations research.
and balance the multiple and somewhat conflicting institutional logics
to which they are exposed (Traxler and Greiling, 2019; Yetano and 2. Literature review
Sorrentino, 2021; Andrades et al., 2023). Such relevance has also been
confirmed by mainstream standard-setters, such as GRI and the Sus 2.1. Prior research on ESG disclosure in the utilities sector
tainability Accounting Standards Board (SASB), which have prepared
industry-specific standards for ESG disclosure in the utilities sector Despite a vast amount of academic literature discussing ESG
(Holder-Webb et al., 2009; Lu et al., 2019; Traxler and Greiling, 2019). reporting practices among both private- and public-sector companies,
Given these premises, this paper aims to extend our knowledge about their antecedents, and their consequences, the utilities industry remains
ESG disclosure practices and their possible explanatory factors in the an under-researched field (Slacik and Greiling, 2020; Eng and Fikru,
particular context of utilities. The paper’s ultimate goal is to examine the 2022).
impact of corporate governance mechanisms on utilities’ ESG disclosure. Prior studies are prevalently country-based and concentrated on
The board of directors is the primary internal governance mechanism specific dimensions of ESG reporting. Primary attention has been
and is responsible for setting corporate strategic directions and policies, devoted to investigating environmental disclosure practices, especially
including those regarding disclosure (Cerbioni and Parbonetti, 2007; in the United States (US). Such a context has been characterised by a
Prado-Lorenzo and Garcia-Sanchez, 2010; Michelon and Parbonetti, long season of regulatory reforms which, on the one hand, have pro
2012). For this reason, an increasing number of scholars have discussed gressively opened the boundaries of the electric power generation sector
the importance of setting a sound corporate governance system and to competition (e.g. Energy Policy Act) and, on the other hand, have
defining an appropriate composition on the board of directors to ensure tried to limit the Greenhouse Gas (GHG) emissions of utilities (e.g. EPA/
that society’s concerns about ESG issues will be adequately addressed in Clean Air Act) and enhance their accountability towards stakeholders (e.
corporate disclosure (e.g. Cucari et al., 2018; Hussain et al., 2018; g. EPA’S GHG Reporting Program) (Freedman and Stagliano, 2008;
Arayssi et al., 2020). Shima and Fung, 2019). Drawing on this scenario, Freedman and Sta
To achieve the research objectives, we collected data from Refinitiv gliano (2008) observed that –despite introducing the Kyoto Protocol –
2
US electric utility companies were still reluctant to provide information be more compliant with GRI indicators than public ones which are not
about global warming or carbon dioxide. In addition, both Silva-Gao listed.
(2012) and Shima and Fung (2019) demonstrated that US utility firms Therefore, this brief literature review has evidenced that most
with higher environmental performance are more likely to disclose studies have focused on single utilities’ ESG disclosure dimensions,
environmental information. However, such evidence has not been particularly the environmental one. Furthermore, most of them are
confirmed by recent studies adopting a broader perspective involving all country-based (the majority are conducted in the US) and rather
ESG dimensions (Eng and Fikru, 2022; Imperiale et al., 2023). In descriptive in nature, as only a few have examined potential de
particular, Eng and Fikru (2022) noted that the Sustainability Ac terminants of utilities’ ESG disclosure. In particular, despite its rele
counting Standards Board (SASB)-based disclosure provided by US vance to the strategic decision-making process and its pivotal role in
investor-owned electric utilities is unrelated to corporate sustainability determining disclosure policies, little is known about corporate gover
performance. Conversely, the study of Imperiale et al. (2023) has pin nance mechanisms’ influence on utilities’ ESG disclosure practices.
pointed an inverse U-shape relationship between US utilities’ sustain
ability disclosure and ESG performance. In other words, they found that
utilities with the best sustainability performance are also not the more 2.2. Theoretical background and hypothesis development
virtuous in terms of disclosure.
Studies on utilities’ environmental disclosure have also been con According to Hackston and Milne (1996, p. 78), there is no “uni
ducted in China (Chang, 2013) and Spain (Moseñe et al., 2013). Spe versally accepted theoretical framework of corporate social accounting”.
cifically, Chang (2013) evidenced that state ownership, financial A vast academic literature has examined CSR and ESG reporting issues
leverage, ownership concentration and long-term debts are positive by adopting different theoretical perspectives spanning from agency to
drivers of Chinese utilities’ environmental disclosure, while, Moseñe legitimacy and stakeholder theory (Gray and KouhyLavers, 1995; Chan
et al. (2013) observed that wind industry firms tend to adopt uniform et al., 2014; Argento et al., 2019; Andrades et al., 2019). Although such
environmental disclosure practices over time, imitating the best prac theories rely on different – even competing – underlying assumptions,
tices of companies considered leaders in the sector. In addition, focusing they can be considered as “complimentary” rather than “overlapping”,
on a sample of electricity generation firms from different worldwide as they allow scholars to examine the same phenomenon from different
regions, Alrazi et al. (2016) found that environmental performance does perspectives (Gray and KouhyLavers, 1995; Holder-Webb et al., 2009).
not influence environmental disclosure. However, they also noted that In particular, ESG disclosure practices are characterised by high
utilities in countries with a stronger environmental commitment tend to complexity and uncertainty that make the use of a single theoretical
disclose higher environmental and emissions information. perspective somewhat limiting to investigating underpinning motives
Another strand of studies focused on other utilities’ sustainability and variations in corporate ESG reporting behaviours (Holder-Webb
disclosure dimensions like carbon, GHG, climate change and biodiver et al., 2009; Traxler and Greiling, 2019; Andrades et al., 2019; 2023).
sity. Bahari et al. (2016) investigated a sample of 90 Accordingly, this study adopts a broader theoretical framework that
electricity-generating companies from China, India and Japan, detecting combines the socio-political perspective of institutional logics and
a general resistance to providing carbon-related information, whereas legitimacy theory with the economic standpoint of agency theory
Talbot and Boiral (2018) shed light on the impression management (Holder-Webb et al., 2009; Traxler and Greiling, 2019; Andrades et al.,
strategies used by energy-sector companies to conceal or justify evi 2023). Specifically, the theory of institutional logics is adopted to
dence about their climate performance. In addition, Kraft (2018) high discuss utilities’ ESG reporting practices. Agency and legitimacy the
lighted how less competitive market structures foster the provision of ories are employed to examine the role of corporate governance mech
more substantive climate disclosures. From another perspective, Ven anisms in influencing ESG disclosure levels.
turelli et al. (2023) shed light on the institutional forces that drive the The theory of institutional logics purports that organisational be
biodiversity accountability practices of a water utility, while Ligorio haviours and structures represent tangible expressions of different
et al. (2022) highlighted the institutional logics stimulating municipal institutional logics (Friedland and Alford, 1991). Institutional logics
water utilities’ sustainability reporting practices. have been defined as “the formal and informal rules of action, interac
Only a few studies have analysed utilities’ disclosure practices tion, and interpretation that guide and constrain decision-makers in
referring to all ESG dimensions (Mio, 2010; Traxler and Greiling, 2019; accomplishing the organisation’s tasks and in obtaining social status,
Slacik and Greiling, 2020; Valenza and Damiano, 2023). In particular, credits, penalties, and reward in the process” (Thornton and Ocasio,
focusing on Italian multi-utilities companies, Mio’s (2010) study has 1999, p. 804). So, they help to interpret the social reality and analyse the
evidenced that the complexity, territorial extent and change in the external institutional pressures that mould organisational behaviours
number of employees influence the quality of sustainability reports. (Friedland and Alford, 1991; Thornton and Ocasio, 1999). From this
Similarly, Valenza and Damiano (2023) shed light on how Italian port perspective, modern society is characterised by multiple institutional
authorities generate public value by investigating their sustainability logics that are “interdependent and yet also contradictory” (Friedland
reports. Taking a broader perspective involving a sample of electric and Alford, 1991, p. 250) and are driven by supra institutional orders:
utilities from 28 countries, Traxler and Greiling (2019) found a tendency market, State, family, religion, corporation, professions and community
toward disclosing economic information rather than social or environ (Thornton et al., 2012; Argento et al., 2019; Mahmood and Uddin,
mental. They also detected that stock exchange listing positively affects 2021). As part of this comprehensive social system, organisations are
electric utilities’ GRI-based sustainability reporting. Similarly, Slacik influenced by the institutional logics arising from these different insti
and Greiling (2020) noted how electric utilities struggle to balance their tutional orders (Mahmood and Uddin, 2021; Ligorio et al., 2022). In
sustainability reports’ economic, environmental and social dimensions. particular, they are expected to adopt behavioural patterns congruent
In addition, they observed that private and listed electric utilities tend to with such logics to gain endorsement from the dominant groups of in
terest existing in the social system and obtain legitimacy for their
3
operations, i.e. the societal license to operate (Deegan and Gordon, survival and the license to operate (Argento et al., 2019; Deegan, 2019;
1996; Greenwood et al., 2010; Busco et al., 2017). The inability to Andrades et al., 2023)2.
address such logics may cause severe threats to organisations’ legiti Nevertheless, the discourse about the impact of corporate gover
macy, compromising the possibility of securing crucial resources for nance on corporate non-financial disclosure remains poorly expressed
their survival (Greenwood et al., 2010; Busco et al., 2017). However, the under agency theory.
number of institutional logics and the intensity of their pressures tend to In recent decades, ethical, environmental and social concerns, which
vary based on the type of organisations, generating different responses for a long time have been considered subordinate to the primary
(Greenwood et al., 2010; Argento et al., 2019; Ligorio et al., 2022). imperative to maximise shareholders’ returns, have climbed the hier
Utilities represent a particular case of organisations in which multiple archy of corporate priorities as crucial factors to generate value in the
and somewhat competing institutional logics regarding the market, long term for all corporate stakeholders (Nicolò et al., 2022a; Camilleri,
State, professions and community coexist (Traxler and Greiling, 2019; 2022). In such an evolving context, scholars have started to question the
Slacik and Greiling, 2020; Ligorio et al., 2022). Specifically, utilities are traditional “narrow and shortsighted” (Jain and Jamali, 2016, p. 253)
often characterised by mixed ownership, including both public and outlook of corporate governance portrayed by agency theory, based on
private owners, and their main aim is to provide infrastructure and the prioritisation of shareholders’ value maximisation. Based on the
services that are pivotal to the development and security of economies of legitimacy theory’s predictions, a broader view of corporate governance
local, regional and national communities (Traxler and Greiling, 2019; has emerged (Rao et al., 2012; Michelon and Parbonetti, 2012; Shamil
Slacik and Greiling, 2020; Ligorio et al., 2022). As such, they should et al., 2014). Legitimacy theory purports the existence of a “social
balance the need to maximise profit, ensuring adequate financial returns contract” between an organisation and society whose central pillar is
for their private owners (market logic) with the purpose of creating that the organisation’s purpose is not only to make profits but also to act
public value that implies “the satisfaction of citizens’ needs and the in a socially responsible manner so as to align with the values, principles
efficient use of public resources, in a way to safeguard the ability to and expectations of the stakeholders’ social system (Suchman, 1995;
provide public value to future generations” (Yetano and Sorrentino, Deegan and Gordon, 1996; Deegan, 2019). Therefore, each organisation
2021, p. 4) (State and community logics). must respect the social contract in return for its acceptance as a legiti
Furthermore, it is worth highlighting how utilities’ business pro mate institution in society (Deegan, 2019). ESG disclosure is a funda
duces both positive and negative externalities as, on the one hand, they mental strategy a company may adopt to respond to stakeholders’ and
create public value but, on the other hand, their operations exert a society’s concerns and demonstrate full compliance with the social
negative impact on the ecosystem in terms of direct greenhouse gas contract (Chan et al., 2014; Deegan, 2019; Nicolò et al., 2022b). How
(GHG) and CO2 emissions (Kraft, 2018; Shima and Fung, 2019; Impe ever, ESG disclosure is influenced by the aptitudes, values and choices of
riale et al., 2023). For this reason, recently, utilities have been the tar strategic actors involved in formulating strategic decisions within firms,
gets of policymakers’ regulations and stakeholder scrutiny. The EU such as governance members (Khan et al., 2013; Cucari et al., 2018).
Green Deal highlighted the need to decarbonise, securitise and make Therefore, according to legitimacy theory, the board of directors’ tasks
more efficient the energy system to achieve climate objectives in 2030 do not end with dealing with agency conflicts and maximising financial
and 2050 in line with the 2015 Paris Agreement (European Commission, performance. The board should fully understand company activities’
2020). The utilities sector has also been at the core of the 2030 Agenda social and environmental impacts and define objectives and strategies in
to drive the transition toward Sustainable Development Goals by
ensuring affordable, reliable and modern energy services, increasing the
share of renewable energy and cleaner fossil-fuel technology, and
2
improving energy efficiency (United Nations, 2015). Moreover, the GRI This study also investigates the impact of internal corporate governance
mechanisms on utilities’ ESG disclosure practices. The most dominant theo
has released a sector supplement that provides specific guidelines to
retical rationale scholars exploit to explain the nexus between corporate
support utilities in increasing the transparency of their sustainability
governance – in terms of board attributes – and disclosure behaviour is agency
reporting practices to benefit stakeholders (Traxler and Greiling, 2019; theory (Jensen and Meckling, 1976; Fama and Jensen, 1983; Jain and Jamali,
Slacik and Greiling, 2020). 2016). Jensen and Meckling defined an agency relationship as “a contract under
As a result, community institutional logics on utilities have assumed which one or more persons (the principal(s)) engage another person (the agent)
even more importance attuned to professional ones as utilities have been to perform some service on their behalf which involves delegating some
recognised as stewards of welfare and public interests and, in turn, decision-making authority to the agent” (1976, p. 308). This separation be
pressured to take a leading role in driving the transition toward sus tween ownership and management creates a misalignment of interests that can
tainable development (Traxler and Greiling, 2019; Slacik and Greiling, occur for different reasons, including different preferred levels of managerial
2020; Ligorio et al., 2022). commitment, risk tolerance and time horizons (Cerbioni and Parbonetti, 2007;
Therefore, due to their environmentally sensitive – and often hybrid Jain and Jamali, 2016). Therefore, as insiders, managers have better access to
private corporate information than shareholders or other investors, which they
– organisational nature, utilities have to navigate amid the tensions and
can easily misuse to pursue their self-interest at the expense of long-term firm
expectations generated by a complex array of institutional logics
wealth maximisation (Fama and Jensen, 1983; Barako et al., 2006). This in
(Manes-Rossi and Nicolo’, 2022; Ligorio et al., 2022). To this end, formation asymmetry scenario gives rise to agency costs for principals
several scholars have highlighted the importance of implementing (ownership) (Jensen and Meckling, 1976; Barako et al., 2006). Corporate
adequate ESG reporting systems (e.g. Busco et al., 2017; Yetano and governance attributes and disclosure represent pivotal mechanisms of
Sorrentino, 2021; Andrades et al., 2023). ESG disclosure is essential to accountability to protect shareholders’ interests and minimise agency costs
addressing the concerns of dominant stakeholders’ groups inherent to (Cerbioni and Parbonetti, 2007). In particular, stringent internal monitoring
the different institutional orders (e.g. market, State, professions, com mechanisms –based on an adequate appointment of board directors strengthen
munity) as it allows them to demonstrate that their corporate operations a company’s control over managers’ self-interested behaviours (Elshandidy and
are in line with their expectations (Deegan, 2019; Traxler and Greiling, Neri, 2015; Hussain et al., 2018). Under the intensive monitoring environment
2019; Imperiale et al., 2023). Utilities’ ESG disclosure should be as ensured by the board of directors, managers are discouraged from opportu
nistically withholding information and are motivated to provide more financial
transparent and comprehensive as possible, reflecting both their nega
and non-financial disclosure to demonstrate a convergence of interests with the
tive and positive impacts on the ecosystem to avoid the risk of losing
principal (Jizi et al., 2014; Hussain et al., 2018). Therefore, from an agency
reputation and, in turn, legitimacy (Walker and Wan, 2012; Traxler and theory’s perspective, a sound corporate governance structure is crucial to
Greiling, 2019). So, it is assumed that utilities’ ESG disclosure practices stimulate more disclosure – about both financial and non-financial performance
are mainly driven by the exogenous pressures exerted by those dominant – that leads to a reduction in information asymmetry and, in turn, agency costs
groups with which they interact to obtain strategic resources for their (Cerbioni and Parbonetti, 2007; Nicolò et al., 2021a; Gerwing et al., 2022).
4
line with the tenets of the social contract (Rao et al., 2012; Chan et al., H1. There is a positive association between board size and utilities’
2014). This gives rise to a concept of sustainable corporate governance ESG disclosure.
in which ESG factors are integrated within the corporate mindset and
placed at the core of its strategic and operational agenda (Nicolò et al., 2.2.2. Board independence
2022b; Velte, 2022). From this theoretical standpoint, companies with Agency theory suggests that independent directors provide the
good corporate governance are considered keener to recognise the necessary checks and balances to mitigate agency conflicts and reduce
legitimacy gap and reflect stakeholders’ legitimate ESG interests in information asymmetry (Fama and Jensen, 1983; Haniffa and Cooke,
corporate disclosure (Rao et al., 2012; Chan et al., 2014; Velte, 2022). 2005; Ntim et al., 2013). Specifically, being external and professional
For these reasons, defining an appropriate composition of the board of referees with non-official positions in the organisation and no relation
directors is crucial to enhance corporate accountability and trans ships with property or management, independent directors have more
parency about non-financial issues and, in turn, the chance to consoli incentives to exert effective and impartial control over managers’ de
date the legitimacy of operations (Prado-Lorenzo and Garcia-Sanchez, cisions to preserve their reputation (Fama and Jensen, 1983; Cerbioni
2010; Rao et al., 2012; Chan et al., 2014; Velte, 2022). In particular, and Parbonetti, 2007; Pizzi et al., 2021). Therefore, their presence is
each director “provides some type of legitimacy for the organisation” crucial to curb managers’ self-interested actions and promote more
(Hillman et al., 2000, p. 241); so, the board of directors attributes play a disclosure about both financial and non-financial issues as a signal of
primary role in creating a transparency environment in which the transparency and lack of complicity with insiders (Jizi et al., 2014;
management team is encouraged to enhance the flow of ESG informa Elshandidy and Neri, 2015)3.
tion transmitted to the outside (Jain and Jamali, 2016; Cucari et al., Empirically, the larger part of the literature found a positive asso
2018). ciation between board independence and: CSR or sustainability disclo
Hence, based on the agency and legitimacy theory’s arguments, this sure (Khan et al., 2013; Jizi et al., 2014; Jizi, 2017; Pizzi et al., 2021);
study examines the association between five main corporate governance carbon disclosure (Liao et al., 2015); environmental disclosure (Rao
attributes (board size, board independence, board gender diversity, Chief et al., 2012); risk disclosure (Ntim et al., 2013); Intellectual Capital (IC)
Executive Officer (CEO) duality and board CSR/sustainability committee) disclosure (Cerbioni and Parbonetti, 2007; Nicolò et al., 2021b); and
and utilities’ ESG disclosure levels. ESG disclosure (Husted and de Sousa-Filho, 2019; Arayssi et al., 2020).
Therefore, based on the broad theoretical and empirical support, the
2.2.1. Board size following hypothesis is posited:
Agency theory provides two contrasting views about the influence of
H2. There is a positive association between board independence and
board size on ESG disclosure. The first suggests that a board’s moni
utilities’ ESG disclosure.
toring capacity increases as the number of directors increases since
larger boards are less likely to be influenced by managers or affected by
2.2.3. Board gender diversity
workload problems (Elshandidy and Neri, 2015; Shamil et al., 2014; Erin
Academic literature agrees that diversity in an organisation fosters
et al., 2022). From this view, larger boards are more prone to pressuring
problem-solving, enhances leadership effectiveness and stimulates
managers to align their behaviours with those of shareholders and other
global collaborations (Carter et al., 2003; Prado-Lorenzo and
investors and, in turn, provide more disclosure to reduce information
Garcia-Sanchez, 2010; Liao et al., 2015). From an agency theory
asymmetry (Elshandidy and Neri, 2015; Shamil et al., 2014; Erin et al.,
perspective, particular attention should be paid to board diversity
2022). Such a perspective aligns with legitimacy theory, according to
regarding gender representation, as men and women have different
which larger boards (including a broader and diversified pool of
cultural, social and personal traits (Carter et al., 2003; Liao et al., 2015).
expertise, knowledge and aptitudes on specific issues, such as ESG fac
Women are considered more committed and diligent than men (Rao
tors) are more able to address legitimate stakeholders’ claims (Rao et al.,
et al., 2012; Ntim et al., 2013). Women are also considered more dem
2012; Ntim et al., 2013; Jizi, 2017). Accordingly, more board directors
ocratic, open to collaboration and less self-oriented than their male
may stimulate higher levels of ESG disclosure to preserve the legitimacy
counterparts (Liao et al., 2015; Pucheta-Martinez and Gallego-Alvarez,
of corporate operations and mitigate external pressures, especially in
2019). As a result, the presence of women directors balances men’s
environmentally sensitive sectors such as utilities (Ntim et al., 2013;
aptitudes and characteristics, enhancing board independence and the
Traxler and Greiling, 2019; Imperiale et al., 2023).
quality of managerial monitoring (Carter et al., 2003; Jizi, 2017), which
On the other hand, agency theory predicts that when a certain board
in turn, fosters higher levels of transparency and accountability about
size threshold is exceeded, directors’ communication and coordination
financial and non-financial issues (Rao et al., 2012; Ntim et al., 2013;
become more strenuous, hindering the effectiveness of monitoring tasks
and slowing down the decision-making process (Cerbioni and Parbo
netti, 2007; Said et al., 2009; Jizi, 2017). In this view, smaller boards are 3
Also, according to legitimacy theory, independent directors are likely to
considered more effective in preventing managers’ opportunistic be
drive firms toward long-term sustainability targets in line with broader stake
haviours and faster in reaching unanimous decisions (Said et al., 2009;
holders’ expectations as their remuneration is not dependent on firms’ financial
Hussain et al., 2018). This fosters higher transparency and account performance (Ntim et al., 2013; Jizi et al., 2014). Also, due to their diversified
ability regarding ESG factors (Said et al., 2009; Rao et al., 2012; Shamil background and lack of commitment to insiders, independent directors offer a
et al., 2014). broader view to the board (Jizi et al., 2014; Liao et al., 2015). They are more
Empirically, most studies found a positive relationship between sensitive to societal demands and more inclined to address sustainability con
board size and: CSR or sustainability disclosure (Said et al., 2009; Jizi cerns and protect the interests of all stakeholders (Prado-Lorenzo and
et al., 2014; Shamil et al., 2014; Jizi, 2017; Pucheta-Martinez and Garcia-Sanchez, 2010; Rao et al., 2012; Liao et al., 2015). For these reasons, the
Gallego-Alvarez, 2019; Erin et al., 2022); carbon disclosure (Liao et al., presence of more independent directors acts as a legitimacy tool as it stimulates
2015); environmental disclosure (Rao et al., 2012); risk disclosure (Ntim the board to provide more ESG disclosure to demonstrate conformity between
et al., 2013; Elshandidy and Neri, 2015); and ESG disclosure (Husted organisational activities and the systems of norms, values and beliefs prescribed
by the social contract (Haniffa and Cooke, 2005; Prado-Lorenzo and
and de Sousa-Filho, 2019). In contrast, some studies found a negative
Garcia-Sanchez, 2010; Michelon and Parbonetti, 2012). Their presence is sig
impact of board size on voluntary disclosure (Cerbioni and Parbonetti,
nificant in utilities, as they suffer from a high legitimacy risk (Imperiale et al.,
2007; Prado-Lorenzo and Garcia-Sanchez, 2010). 2023). In such a context, independent directors act as accountability mecha
Therefore, based on the broad theoretical and empirical support, the nisms to stimulate more ESG disclosure that demonstrates social responsibility
following hypothesis is posited: and a full commitment to contributing toward a transition to sustainable
development (Jizi et al., 2014; Liao et al., 2015; Erin et al., 2022).
5
Shamil et al., 2014)4. monitor managers and address different stakeholders’ legitimate claims
From an empirical perspective, most studies found a positive rela through higher levels of ESG disclosure (Ntim et al., 2013).
tionship between gender diversity and: CSR or sustainability disclosure Empirical evidence is not unanimous. Some studies found that CEO
(Jizi, 2017; Pucheta-Martinez and Gallego-Alvarez, 2019; Erin et al., duality negatively influences: CSR or sustainability disclosure (Shamil
2022); carbon disclosure (Liao et al., 2015); environmental disclosure et al., 2014); IC disclosure (Cerbioni and Parbonetti, 2007); ESG
(Rao et al., 2012); risk disclosure (Ntim et al., 2013); IC disclosure disclosure (Husted and de Sousa-Filho, 2019; Arayssi et al., 2020).
(Nicolò et al., 2021a); and ESG disclosure (Arayssi et al., 2020; Nicolò However, in other cases, merging the role of CEO and chair positively
et al., 2022b). However, a few studies contradicted this positive evi affects corporate disclosure (Jizi et al., 2014; Pucheta-Martínez and
dence (Shamil et al., 2014; Husted and de Sousa-Filho, 2019). Gallego-Álvarez, 2019).
Therefore, based on the broad theoretical and empirical support, the However, the negative association is consistent with the theoretical
following hypothesis is posited: and managerial rationale recommending separating the two roles,
especially in environmentally sensitive firms. Thus, the following hy
H3. There is a positive association between board gender diversity and
pothesis is posited:
utilities’ ESG disclosure.
H4. There is a negative association between CEO duality and utilities’
2.2.4. CEO duality ESG disclosure.
CEO duality is a situation whereby the same person holds the role of
the CEO and that of the board’s chairman (Ntim et al., 2013; Jain and 2.2.5. CSR/sustainability committee
Jamali, 2016; Husted and de Sousa-Filho, 2019), which usually occurs A CSR/sustainability committee is a sub-commission composed of
when the CEO comes from a rewarded career or controls a relevant members with specific expertise and knowledge on managing and
proportion of shares (Jizi et al., 2014; Jizi, 2017). From an agency reporting social and environmental issues (Pucheta-Martinez and
theory perspective, this scenario entails a concentration of executive and Gallego-Alvarez, 2019; Gerwing et al., 2022). So, it is considered a
control powers that hinders the necessary system of checks and balances capital resource for a company as the specific non-financial background
that should be ensured by corporate governance (Fama and Jensen, provided by its members allows the organisation to incorporate sus
1983; Cerbioni and Parbonetti, 2007; Jain and Jamali, 2016). This sit tainability issues into its strategic direction and operations and translate
uation reduces the board’s independence and impairs its effectiveness in them into concrete actions (Michelon and Parbonetti, 2012; Amran
monitoring managers’ behaviours, leading to lower transparency and et al., 2014). In particular, a specific CSR/sustainability committee
accountability (Cerbioni and Parbonetti, 2007; Jizi, 2017). Also, inside supports the board in systematically defining and reviewing plans,
directors might be worried about engaging in discussions with the policies and operational activities concerning all corporate sustainabil
CEO/chair, thus deferring to their decisions; also, they may hesitate to ity dimensions (Michelon and Parbonetti, 2012; Amran et al., 2014; Liao
raise objections if the board’s decisions are contrary to their own et al., 2015). It is also a primary actor in ensuring the quality and cor
opinion or shareholders’ and stakeholders’ interests, to avoid personal rectness of the ESG reporting process (Michelon and Parbonetti, 2012;
penalisation (Cerbioni and Parbonetti, 2007; Arayssi et al., 2020). The Hussain et al., 2018; Gerwing et al., 2022). Therefore, from a legitimacy
result is creating a corporate environment with higher information perspective, its existence symbolises a “strategic posture” (Michelon and
asymmetries and lower transparency (Ntim et al., 2013; Pucheta- Parbonetti, 2012, p. 486) of the company toward addressing stake
Martinez and Gallego-Alvarez, 2019; Arayssi et al., 2020). holders’ needs and contributing toward sustainable development
The legitimacy theory corroborates such arguments, according to (Hussain et al., 2018; Pizzi et al., 2021). So, such a committee plays a key
which the CEO/chair may exploit its authority to direct the board’s role, especially in the utilities industry, in monitoring the legitimacy of
agenda to its self-utility, privileging short-term profit-maximisation in the firm’s operations and its congruence with society’s expectations and
vestments at the expense of sustainability long-term investments if they recognising the claims of the different stakeholder groups (Michelon and
are considered wasteful (Jain and Jamali, 2016; Pucheta-Martinez and Parbonetti, 2012; Liao et al., 2015). For these reasons, establishing a
Gallego-Alvarez, 2019). So, the CEO/chair will be less likely to support specific CSR/sustainability committee is a fundamental strategy a
decisions that contemplate the stakeholders’ legitimate claims if they company may adopt to increase its transparency and accountability on
contrast their interests (Khan et al., 2013; Pucheta-Martinez and ESG factors (Michelon and Parbonetti, 2012; Hussain et al., 2018;
Gallego-Alvarez, 2019; Arayssi et al., 2020). This may result in a general Gerwing et al., 2022).
reduction in ESG disclosure levels, threatening the legitimacy threats of Empirically, academic literature converged on detecting a positive
the company (Said et al., 2009; Khan et al., 2013; Ntim et al., 2013). impact of the presence of a CSR/sustainability committee on: CSR or
Hence, considering the need to maintain a higher degree of legiti sustainability disclosure (Michelon and Parbonetti, 2012; Amran et al.,
macy for their environmentally sensitive operations, utilities may 2014; Pucheta-Martinez and Gallego-Alvarez, 2019; Gerwing et al.,
benefit from separating the CEO and chair roles. Such a dual leadership 2022); carbon disclosure (Liao et al., 2015); and ESG disclosure (Cucari
structure may entail benefits in terms of greater board capacity to et al., 2018; Arayssi et al., 2020).
Therefore, based on the broad theoretical and empirical support, the
following hypothesis is posited:
4
Also, legitimacy theory identifies board gender diversity as a positive factor H5. There is a positive association between the presence of a board
stimulating more ESG disclosure. In particular, women directors are more CSR/sustainability committee and utilities’ ESG disclosure.
sensitive to stakeholders’ concerns regarding social and environmental issues,
risk-averse and prone to promote socially responsible practices (Hussain et al., 3. Empirical strategy
2018; Arayssi et al., 2020; Nicolò et al., 2022b). Hence, their presence adds
quality to the board discussion and decision-making, stimulating a democratic 3.1. Sample
environment where shareholders’ and stakeholders’ interests are correctly
balanced (Liao et al., 2015; Jizi, 2017). So, companies with higher board gender
The sampling process starts by selecting all publicly listed worldwide
diversity have a good mix of backgrounds and capabilities reflecting stake
holders’ legitimate interests and societal demands in ESG disclosure (Ntim utilities for which information is available on the Eikon Refinitiv data
et al., 2013; Shamil et al., 2016; Arayssi et al., 2020). Because of utilities’ base. Thus, an initial sample of 306 utilities (2656 firm-year observa
environmentally sensitive nature and the need to combine profit maximisation tions) emerged from the first step. However, 41 utilities (906) for which
with public value creation, board gender diversity may be essential to driving not all information is available (especially the ESG disclosure and
corporate legitimacy through more ESG disclosure. governance data) were excluded. Hence, the final sample comprises 265
6
utilities (1,750) from 35 countries. 3.2. Data analysis

The sample period begins in 2011 and ends in 2019. The reason for
selecting this period lies in data availability. Although Eikon Refinitiv 3.2.1. Dependent variable
data coverage extends to a longer time span, we chose the 2011–2019 Based on the previous literature (Arayssi et al., 2020; Qureshi et al.,
period because only a few utilities had enough information available in 2020; Luo and Tang, 2022; Nicolò et al., 2022b; Veltri et al., 2023), we
the earlier and later years. So, all the publicly listed utilities companies employed a third-party approach to defining the dependent variables.
were selected according to the Eikon Refinitiv business classification Specifically, four Refinitiv ESG scores have been adopted to measure the
(Refinitiv, 2022a; Refinitiv, 2022b). Specifically, we selected utilities ESG disclosure (ESGD) and individual environmental (ED), social (SD),
from five industries: electric utilities, independent power producers, and governance (GD) dimensions. Refinitiv scores are obtained from
natural gas utilities, water and related utilities, and multi-line utilities. different sources, including annual reports, company websites and CSR
Accordingly, data on ESG reporting and governance attributes were reports. Each score “undergoes a careful process to standardise the in
collected on the Eikon Refinitiv database. These data have frequently formation and guarantee it is comparable across the entire range of
been used in previous studies (Arayssi et al., 2020; Nicolò et al., 2022b). companies” (Refinitiv, 2022a, p. 4). Scores are calculated on a specific
We collected all other data used in this study from Worldscope. set of weighted measures attributed to each ESG dimension and are
Panels A and B of Table 1 document the sample composition across obtained from verifiable publicly available information sources (Refi
countries and industries. nitiv, 2022a; Refinitiv, 2022b).
The geographical characteristics of the sample are as follows: Accordingly, we selected four different ESG disclosure scores as our
24.46% of the utilities are located in the US, followed by Brazil (6.69%), dependent variables:
Canada (6.51%), Hong Kong (6.46%) and Japan (6.40%). The least
represented country is Bermuda (0.40%). As portrayed in Panel B, • ESGD, which reflects the utilities’ overall ESG disclosure based on
utilities operate in the following industries: electric (53.83%), multi-line 186 comparable measures; the other scores representing the break
(16.17%), natural gas (13.03%), independent power producers (8.69%) down of ESGD (and its 186 sub-scores) are:
and water and related utilities (8.29%). Considering the unavailability • ED, which reflects the utilities’ environmental disclosure on resource
of ESG data for some years, the panel data structure is unbalanced, use (20), emissions (28) and innovation (20);
meaning that the total number of firm-year observations is denoted as N • SD, which reflects the utilities’ social disclosure based on the
(Gujarati et al., 2020). workforce (30), human rights (8), community (14), and product re
sponsibility (10);
• GD, which reflects the utilities’ corporate governance disclosure
Table 1 based on management (35), shareholders (12) and CSR strategy (9)
– Sample composition. sub-scores.
Panel A (Sample by country) Panel B (Sample by industry)
As a result, ESGD comprises 68 environmental, 62 social and 56
Country N % Industry N %
governance measures. ESGD and its dimensions scores range from 0 (no
Argentina 26 1.49 Electric Utilities 942 53.83
ESG information disclosed) to 100 (all ESG information disclosed).
Australia 45 2.57 Independent Power 152 8.69
Producers
Austria 10 0.57 Natural Gas Utilities 228 13.03 3.2.2. Independent variables
Belgium 9 0.51 Water & Related 145 8.29 Table 2 (Panel A) presents how independent variables (BS, BI, BGD,
Utilities CD and CSR/SC) are labelled, measured and referenced according to the
Bermuda 7 0.40 Multi-line Utilities 283 16.17
prior literature. Besides these, we include three control variables to
Brazil 117 6.69
Canada 114 6.51 Total 1750 100.00 avoid biased results: Size, Profitability and Leverage. These control vari
Cayman Islands 9 0.51 ables are based on extensive literature examining the determinants of
Chile 68 3.89 CSR/ESG disclosure and their dimensions. Panel B completes the in
China 70 4.00
formation provided by Panel A for control variables.
Colombia 12 0.69
Czech Republic 9 0.51
Finland 9 0.51 3.3. Empirical model
France 27 1.54
Germany 31 1.77 Equation (1) represents the estimation model used for testing ESG
Greece 15 0.86
Hong Kong 113 6.46
disclosure and its dimensions.
India 54 3.09 The dependent variable considers alternatively comprehensive ESG
Indonesia 9 0.51 disclosure (ESGD) (Model 1) and its three dimensions, namely Envi
Italy 61 3.49 ronmental Disclosure (ED) (Model 2), Social Disclosure (SD) (Model 3)
Japan 112 6.40
and Governance Disclosure (GD) (Model 4).
Korea; Republic (S. 26 1.49
Korea) The other variables are defined in the following way:
Malaysia 36 2.06 BS = Board size for the company i in the period t-1.
New Zealand 39 2.23 BI = Board independence (%) for the company i in the period t-1.
Peru 12 0.69 BGD = Board gender diversity (%) for the company i in the period t-
Philippines 42 2.40
Poland 32 1.83
1.
Portugal 10 0.57 CD = Board CEO non-duality (1/0) for the company i in the period t-
Russia 47 2.69 1.
Saudi Arabia 9 0.51 CSRC/SC = Board sustainability committee (1/0) for the company i
Singapore 9 0.51
in the period t-1.
Spain 46 2.63
Thailand 13 0.74 Controls is a vector for control variables. Specifically, we control for
United Kingdom 74 4.23 changes in company size (measured as logarithm of total assets of
United States of 428 24.46 company i in the period t-1), profitability (measured as net income on
America total assets of company i in the period t-1) and leverage (measured as
Total 1750 100.00
total debt on total assets of the company i in the period t-1).
7
Table 2 These results may be discussed in light of the theory of institutional

– Variables description. logics. Specifically, utilities are environmentally sensitive firms, preva
Variables Description Source Literature lently characterised by a hybrid nature that combines objectives of
different nature, spanning from maximising shareholders’ return to the
(Panel A: Main independent variables)
BS Board size, proxied by Refinitiv Arayssi et al. (2020); production of public value for the stakeholders’ community and society
the number of board (ASSET4) Imperiale et al. (2023); at large (Yetano and Sorrentino, 2021; Manes-Rossi and Nicolo’, 2022;
members. Jizi et al. (2014); Andrades et al., 2023). Their economic, social and environmental rele
Michelon and vance expose them to multiple and often conflicting institutional logics
Parbonetti (2012);
Wasiuzzaman et al.,
driven by dominant institutional orders (i.e. market, State, pro
2022 fessionals, community) that need to be correctly balanced to preserve
BI Board independence, Refinitiv Arayssi et al. (2020); the legitimacy of operations (Friedland and Alford, 1991; Thornton and
measured by the (ASSET4) Imperiale et al. (2023); Ocasio, 1999; Andrades et al., 2023). From this perspective, the slightly
number of independent Jizi et al. (2014); (
growing trend in ESG disclosure may be considered a reaction to the
directors over the total Husted and de
number of board Sousa-Filho, 2019); increased institutional pressures that have recently targeted utilities. In
members. Michelon and particular, a peak was observed in 2015 when the 2030 UN Agenda
Parbonetti (2012); introduced the SDGs and the Paris Agreement on climate change was
Wasiuzzaman et al., adopted by 196 Parties at the Conference of the Parties (COP) 21 in
2022
BGD Board gender diversity, Refinitiv Arayssi et al. (2020);
Paris. Such events have exerted community, professional, and institu
measured by the (ASSET4) Imperiale et al. (2023); tional pressures on utilities to integrate sustainability into their strategy,
number of female Gerwing et al. (2022) business models and reporting cycle. Another increasing trend may be
directors over the total observed starting from 2017 when the EU 95/2014 Directive on
number of board
non-financial reporting was entering into force in Europe (EU, 2014),
members.
CD Board CEO duality, Refinitiv Arayssi et al. (2020); and the recommendations of the Task Force on Climate-related Financial
indicates (1/0) whether (ASSET4) Imperiale et al. (2023); Disclosures (TFCD) were launched (Pizzi, 2022).
a company has a CEO Jizi et al. (2014); Moreover, in 2018, the SASB standards were approved, including a
duality situation Michelon and specific standard for the Electric Utilities and Power Generators sector
Parbonetti (2012)
(Eng et al., 2022). This vital step has influenced the ESG reporting
CSRC/SC CSR/sustainability Refinitiv Arayssi et al. (2020); (
Committee, indicates (ASSET4) Husted and de practices of US companies included in the sample. However, although an
(1/0) whether a Sousa-Filho, 2019); increasing trend in ESG disclosure has been observed, the average score
company has a CSR Imperiale et al. (2023); value remains moderate. This finding confirms that despite, on the one
committee or Gerwing et al. (2022);
hand, institutional logics exerting pressures on utilities to increase
sustainability Rao et al. (2012);
committee Wasiuzzaman et al., accountability for ESG issues, on the other hand, the multiplicity of
2022 stakeholders may generate tensions between institutional logics due to
(Panel B: Control variables) their different values and expectations (Yetano and Sorrentino, 2021;
Size Natural logarithm of Refinitiv Arayssi et al. (2020); Andrades et al., 2023). Thus, it can be difficult for utilities to define
fiscal year’s total assets (Worldscope) Wasiuzzaman et al.,
comprehensive ESG reporting practices that satisfy diverging and
in USD 2022
Profitability Net income deflated by Refinitiv Arayssi et al. (2020) competing institutional logics.
total assets (Worldscope) As regards independent variables, the average company’s board size
Leverage Total debt to total Refinitiv Wasiuzzaman et al., (BS) is about 12 directors, indicating that the number of members is not
assets (Worldscope) 2022
plethoric. On average, about 55% of these are independent (BI), and
16% are women (BGD). Further, in a minority of companies (29.83%),
FE is a vector for year, country, and sector fixed effects controlled by the CEO is also the chairman of the board of directors (CD), and in the
specially defined variables. majority of cases (69.20%), the company has established a specific CSR/
μ and η are the classical and individual error terms, respectively. sustainability committee (CSRC/SC). Examination of the control vari
Since the dependent variables range between 0 and 100, Equation ables statistics indicates that the average size of companies (expressed as
(1), and thus (Models 1, 2, 3 and 4) were estimated using Tobit re a natural logarithm) is about 25.54, the profitability is about 3.15, and
gressions for the panel data (Frías-Aceituno et al., 2013; García Sánchez the leverage is about 0.36.
and Martínez Ferrero, 2017), considering the double-censored charac
teristics of ESGD and its dimensions. Finally, the model employed 4.2. Univariate results
one-year lagged independent variables to avoid endogeneity problems.
The conceived model is represented in Fig. 1. Table 4 presents pairwise correlation coefficients between the
dependent and independent variables.
4. Results and discussion The highest pairwise correlation coefficient is between the variables
BI and BGD (0.523). According to the literature (Gujarati et al., 2020),
4.1. Descriptive statistics being lower than the threshold of 0.8, multicollinearity problems can be
excluded. The variance inflation factor (VIF) was calculated for all the
The summary statistics from dependent and independent variables models to corroborate such evidence. The obtained values range be
are shown in Table 3. tween 1.04 and 1.67, with the average VIF being 1.24. Since none of the
The breakdown of the ESG disclosure score into its dimensions pin variables has a VIF value over 10, multicollinearity is not a problem in
points that governance disclosure (GD) is the dimension with the highest interpreting the Tobit regression results (Gujarati et al., 2020; Neter
disclosure score (53.52%), with a standard deviation (SD) of 21.79, et al., 1983).
followed by the overall ESGD score with an average score of 47.87 and
ED (46.10). Such values are not particularly high, although, as shown in 4.3. Multivariate results
Fig. 2, the overall ESGD score slightly increased from 46.24% (2011) to
50.24% (2019). The same can be noted for ED and SD. Table 5 reports the empirical results collected through multivariate
analysis. Both panel-level standard deviation of residuals (σu) and
8
Fig. 1. Theoretical model.
the legitimising role of independent directors in utilities and their

Table 3
relevance in stimulating more ESG disclosure to demonstrate how util
– Descriptive statistics.
ities’ activities are respectful of the social and environmental constraints
(Continuous variables) and comply with the virtual social contract signed with society (Walker
Variable N Mean SD Min Max and Wan, 2012; Deegan, 2019).
ESGD 1750 47.87 19.88 2.17 91.03 Results also evidence that there is a positive and statistically signif
ED 1750 46.10 26.25 0.00 97.52 icant relationship between CSR/sustainability committee and ESG
SD 1750 45.73 23.30 0.48 96.50 overall disclosure (β = 7.486, p-value<0.01), as well as all its di
GD 1750 53.52 21.79 3.42 98.46 mensions (3.842< β ≤9.747, p-value<0.01). These results support H5
BS 1750 11.61 3.81 1.00 28.00
BI 1750 54.55 28.36 0.00 100.00
and are consistent with the prior literature (e.g. Michelon and Parbo
BGD 1750 16.37 13.21 0.00 62.50 netti, 2012; Husted and de Sousa-Filho, 2019; Arayssi et al., 2020). A
Size 1750 24.54 2.37 16.20 32.92 legitimacy-based reading of this result highlights how establishing a
Profitability 1750 3.15 7.06 − 172.41 44.83 specific CSR/sustainability committee may help utilities address their
Leverage 1750 0.36 0.16 0.00 2.18
high legitimacy risk by assuming a “strategic posture” toward stake
(Dummy variables) holders and society (Michelon and Parbonetti, 2012; Amran et al.,
Variable N 0 % 1 % 2014). Being affected by higher social and political pressures to assume
a pivotal role in contributing to sustainable development and specific
CD 1750 1228 70.17 522 29.83
CSRC/SC 1750 539 30.80 1211 69.20 SDGs (e.g. SDG 7 and 13), the implementation of a particular committee
of experts is crucial for supporting utilities to incorporate sustainability
issues into their strategies and business models and communicate to the
standard deviation of the overall error term (σe) are significant at a 1% outside their sustainability pledge (Pizzi et al., 2021; Nicolò et al.,
level for all ESG disclosure measures. Additionally, the likelihood-ratio 2022b; Gerwing et al., 2022). Accordingly, such results evidence that a
test statistic rejects the null hypothesis that there are no panel-level CSR/sustainability committee helps the utilities’ board recognise po
effects with a 1% significance level. tential gaps in the legitimacy of their operations and provide higher
Column (1) gives the reported findings for model 1, in which the accountability and transparency on ESG.
dependent variable is the aggregate score of ESG disclosure. Columns As regards individual ESG dimensions, models 2 and 3 evidence that
(2), (3), and (4) report the findings regarding the other three models in board size (BD) is positively related to the environmental (ED, β = 0.340,
which the individual environmental, social, and governance dimensions p-value<0.05) and social (SC, β = 0.268, p-value<0.05) disclosure di
of ESG disclosure have been tested as dependent variables. mensions. These findings align with H1 and the prior literature (Said
Column (1) results reveal that two out of five variables positively and et al., 2009; Jizi et al., 2014; Shamil et al., 2014; Husted and de
significantly affect overall ESG disclosure (ESGD). Sousa-Filho, 2019). Hence, this evidence confirms agency theory’s ar
Specifically, a positive and statistically significant relationship exists guments, in which larger boards exert a higher monitoring pressure on
between board independence and ESGD (β = 0.0667, p-value<0.01). managers, enabling utilities to reduce information asymmetries by
The same positive and significant relationship can also be observed for disclosing environmental and social information (Shamil et al., 2014;
two out of three ESG disclosure dimensions: social disclosure (β = Erin et al., 2022). Also, in line with legitimacy theory, this result high
0.0578, p-value<0.05) and governance disclosure (β = 0.226, p-val lights how larger boards support utilities to mitigate external pressures
ue<0.01). This result is consistent with prior empirical evidence (e.g. and address society’s concerns through higher ESG disclosure (Rao
Jizi et al., 2014; Jizi, 2017; Husted and de Sousa-Filho, 2019; Arayssi et al., 2012; Ntim et al., 2013; Jizi, 2017).
et al., 2020) and supports H2. It confirms that appointing more inde Also, board gender diversity (BGD) is positively related to gover
pendent directors on the board stimulates utilities to disclose greater nance disclosure (GD, β = 0.108, p-value<0.05) but negatively related
levels of ESG information. From an agency standpoint, this affirms that to environmental disclosure (ED, β = -0.118, p-value<0.01). This con
independent directors tend to promote more transparency, encouraged trasting evidence confirms the beneficial effect of having a higher
by their need to preserve their role as external referees and demonstrate number of women directors only in terms of transparency of governance
the absence of any complicity with insider directors. Interpreting such information. However, the higher sensitivity toward stakeholders’
an association through the lens of legitimacy theory, we can corroborate concerns and welfare issues does not stimulate the board to provide
9
Fig. 2. ESG disclosure trend.
environmental transparency. So, H3 is only partially confirmed how to aggregate ESG disclosure has been measured.
(governance), while it is rejected for the environmental dimension.
Finally, CEO duality (CD) is negatively related to governance 5. Conclusions
disclosure (GD, β = -2.895, p-value<0.05). This finding confirms that,
according to agency theory’s arguments, when a CEO also holds the Utilities are fundamental companies that produce, manage and
position of the chairman, it alters the system of physiological checks and distribute essential public services such as energy, natural gas, water and
balances of the corporate governance mechanism, causing information waste collection. The utilities sector has recently undergone a season of
asymmetries and lower transparency (Husted and de Sousa-Filho, 2019; relevant changes characterised by progressive market liberalisation and
Arayssi et al., 2020). Furthermore, as implied by legitimacy theory, deregulation, reducing entry and exit barriers (Bresnihan, 2016; Kraft,
when their interests do not coincide, utilities’ CEO/chair will be less 2018; Traxler and Greiling, 2019). As a result, the number of companies
likely to support decisions meeting stakeholders’ legitimate claims. operating in this sector has dramatically increased as well as the
These consequences are confirmed only for the relationship between attention of policymakers, regulators and other stakeholders toward the
CEO duality and governance disclosure, allowing us to accept H4 social and environmental impacts exerted by utilities (Giacomini et al.,
partially. 2020; Slacik and Greiling, 2020; Eng and Fikru, 2022). Utilities are
Last, among the control variables, we find evidence of a positive characterised by a hybrid nature in which profit-maximising logics
relationship between company size and all ESG disclosure dimensions coexist with the central purpose of maximising profits and creating
and a negative relationship between leverage and three out of four public value. Also, their operations produce negative externalities in
dependent variables (ESG disclosure and its social and governance terms of emissions that elicit massive scrutiny from the public (Bresni
dimensions). han, 2016; Traxler and Greiling, 2019; Imperiale et al., 2023). Accord
ingly, utilities’ legitimacy is often at stake as it largely depends on their
ability to reconcile the multiple and often conflicting institutional logics
4.4. Additional analysis driven by the demands of the dominant stakeholder groups that popu
late their social reality. For these reasons, ESG reporting practices as
In previous multivariate analysis, consistent with prior studies sume pivotal relevance for utilities to demonstrate compliance with
(Arayssi et al., 2020; Qureshi et al., 2020; Luo and Tang, 2022; Nicolò norms, expectations and values arising from the different institutional
et al., 2022b), ESG disclosure was measured by an aggregate ESG score, logics to which they are exposed.
combining environmental, social and governance disclosure di Nevertheless, although the academic debate on sustainability and
mensions. However, governance disclosure reflects specific attributes ESG reporting has matured, the utilities sector remains an under
already considered in the independent variables. Aware of this potential investigated field. In particular, little is known about the potential an
bias, an additional analysis was performed to examine the effects of a tecedents of ESG disclosure provided by utilities.
different definition of the aggregate disclosure measure that excludes With this in mind, this paper broadens the scope of existing literature
the governance disclosure (GD) from its calculation. As a result, the new on sustainability disclosure, offering fresh insight into utilities’ ESG
variable, ESD, corresponds with the average of environmental disclosure reporting practices from the theoretical perspective of institutional
(ED) and social disclosure (SD). logics. In addition, the central contribution of this paper stems from the
The results of this additional test are summarised in Table 6. analysis of the impact of particular internal corporate governance
The additional analysis results are generally consistent with the main mechanisms on utilities’ ESG disclosure practices. In particular, adopt
models (Table 5). In particular, ESD is positively influenced by BS (β = ing a combined theoretical perspective based on agency theory and
0.421, p-value<0.01) and CSRC/SC (β = 8.841, p-value<0.01). Overall, stakeholder theory, this study proposes a longitudinal analysis to
these results indicate that the main study’s findings are not sensitive to
10
examine the impact of five main corporate governance attributes (board
1.000
size, board independence, board gender diversity, Chief Executive Officer
(12)
(CEO) duality and board CSR)/sustainability committee) on ESG disclosure
levels provided by a sample of 265 worldwide organisations operating in
the utilities sector during the 2011–2019 period.
− 0.139***
This study’s results evidence an increasing trend for ESG disclosure
provided by utilities during the 2011–2019 period. Such evidence can be
1.000
(11)
ascribed to the compelling need for utilities to employ ESG accounting as

an instrument to balance multiple and also diverging institutional logics
that require, on the one hand, that they ensure adequate financial
returns to shareholders and, on the other hand, provide essential ser
0.105***
0.179***
1.000
vices and infrastructure to the benefit of State and community. During a
(10)
period of regulations and quasi-regulations, utilities have also used ESG

accounting to highlight their leading role in driving the transition to
ward sustainable development and to preserve their reputation in the
− 0.058** eyes of social constituents5.
0.110***
0.092***
1.000
From a practical perspective, this study’s results provide arguments

(9)
supporting policymakers and regulators like the European Financial

Reporting Advisory Group (EFRAG) in their definition of sector-specific
standards for sustainability reporting. In particular, we have confirmed
− 0.075***
the relevance of the utilities sector and the need to define specific
− 0.025
− 0.008
− 0.004
disclosure requirements that may lead utilities to increase their trans

1.000
(8)
parency and accountability toward stakeholders. Particular attention

deserves to be given to the US context, where a longstanding debate on
the mandatory adoption of ESG reporting has been ongoing. Our results
demonstrated that although ESG disclosure values have shown an
− 0.307***
0.115***
0.170***
− 0.020
− 0.006
increasing trend from 2011 to 2019, there were some negative peaks in
1.000
some periods. This finding might confirm that some companies might
(7)
deliberately reduce their ESG disclosure levels for their own interest in
the absence of coercive pressures. As our sample comprises many US
companies, our results may stimulate US policymakers and regulators
− 0.431***
− 0.087***
0.523***
0.273***
0.093***
like the Securities and Exchange Commission (SEC) to continue their

1.000
0.011
recent efforts to regulate ESG disclosure. The new regulation proposed

(6)
by the SEC would require US-listed companies to disclose their Scope 1

and 2 emissions, including an auditing requirement. So, this may
represent an institutional pressure that may decisively put urgency on
− 0.238***
− 0.097***
0.126***
0.342***
0.107***
companies to enhance their transparency to benefit investors and other

− 0.001
− 0.009
1.000
stakeholders. In line with this, governments and regulators worldwide

(5)
should reinforce their coercive pressures in areas they deem essential for
monitoring the ESG performance of utilities and their progress toward
− 0.118***
− 0.138***
− 0.081***
0.455***
0.307***
0.256***
− 0.022
1.000
0.035
5
In line with agency and legitimacy theory tenets, this study sheds light on
(4)
the importance of specific attributes of boards of directors in stimulating more

accountability and transparency around ESG factors. So, implementing an
adequate internal corporate governance mechanism is essential for utilities to
mitigate information asymmetry arising from agency conflicts and enhance
− 0.072***
0.352***
0.165***
0.113***
0.159***
0.480***
0.101***
0.069***
legitimacy for their environmentally sensitive operations that create appre

1.000
0.017
hension among stakeholders and attract social and political scrutiny. In

(3)
particular, the study highlighted how appointing more independent members to

the board stimulates ESG disclosure. Board independence ensures greater
control over managers’ behaviours and helps companies recognise societal
0.734***
0.263***
0.325***
0.109***
0.513***
0.270***
demands and address the sustainability concerns of all stakeholders through

− 0.013
− 0.019
1.000
0.008
0.023
higher transparency. Also, the presence of a specific CSR/sustainability com

(2)
mittee is a strategy to assume a more strategic posture toward stakeholders and

promptly recognise the legitimacy gap between a firm’s operations and soci
ety’s expectations. So, establishing a team of experts particularly sensitive to
***p < 0.01, **p < 0.05, *p < 0.1.
sustainability issues helps utilities integrate social and environmental concerns

0.908***
0.892***
0.554***
0.212***
0.174***
0.205***
0.540***
0.151***
− 0.006
− 0.037
into their corporate plans, strategy and reporting cycle to ensure compliance
1.000
0.026
(1)
with emerging stakeholders’ concerns. Accordingly, our results have provided

empirical evidence that such a committee positively affects utilities’ ESG
Pairwise correlations.
disclosure level. The study’s results also highlight that some corporate gover
nance attributes exert only a partial influence on ESG disclosure. In line with
(11) Profitability
legitimacy theory’s predictions, more women on boards and the separation of

(12) Leverage
(9) CSRC/SC
the CEO and chair roles create a more transparent environment in utilities
Variables
(10) Size
(7) BGD
(1) ESG
regarding governance issues. Also, increasing the number of directors on the

Table 4
(4) GD
(8) CD
(2) ED
(3) SD
(5) BS
(6) BI
board permits utilities to discharge more social and environmental information

to the outside.
11
Table 5
Tobit panel regression results.
Variables Expected sign (HP) ESGD ED SD GD
Model (1) Model (2) Model (3) Model (4)
(Main variables)
BS + (H1) 0.150 0.340** 0.268** − 0.217
(0.0994) (0.138) (0.121) (0.142)
BI + (H2) 0.0667*** 0.00326 0.0578** 0.226***
(0.0192) (0.0264) (0.0232) (0.0269)
BGD + (H3) − 0.0470 ¡0.118*** − 0.0526 0.108**
(0.0297) (0.0412) (0.0362) (0.0428)
CD - (H4) − 1.119 − 1.093 − 0.0112 ¡2.895**
(0.808) (1.116) (0.986) (1.163)
CSRC/SC + (H5) 7.485*** 8.771*** 9.747*** 3.842***
(0.701) (0.972) (0.851) (0.999)
(Control variables)
Size 2.509*** 3.658*** 2.160*** 0.723*
(0.392) (0.519) (0.462) (0.429)
Profitability 0.0102 − 0.00901 − 0.00303 0.0628
(0.0364) (0.0506) (0.0446) (0.0545)
Leverage − 6.663** − 5.489 − 9.477** − 6.944*
(3.112) (4.244) (3.757) (4.053)
Year FE Included Included Included Included
Country FE Included Included Included Included
Sector FE Included Included Included Included
Constant − 31.30*** − 64.24*** − 27.21** 23.74**
(9.932) (13.15) (11.72) (10.88)
σu 16.03*** 20.89*** 18.67*** 15.84***
(0.770) (1.011) (0.879) (0.787)
σe 7.275*** 10.12*** 8.926*** 11.10***
(0.135) (0.188) (0.165) (0.205)
ρ 0.830 0.810 0.814 0.670
Observations 1750 1750 1750 1750
Number of ID 265 265 265 265
encourages utilities to define their internal corporate governance

Table 6
mechanisms carefully, devoting primary attention to an accurate se
Additional analysis.
lection of the board of directors’ members. Specifically, utilities should
Variables Expected sign (HP) ESD increase the presence of independent directors on their boards to pro
Model (1) mote greater sensitivity toward society’s concerns and their aptitude for
(Main variables) achieving greater ESG transparency. This action is fundamental to
BS + (H1) 0.421*** addressing institutional pressures and gaining more legitimacy.
(0.120) Furthermore, a specific CSR/sustainability committee, acting similarly
BI + (H2) 0.0214 to the audit committee but focused on ESG issues, appears to be good
(0.0230)
governance practice and an essential body that utilities must establish to
BGD + (H3) − 0.0527
(0.0350) implement sound ESG reporting practices.
CD - (H4) − 1.562 The study’s findings should be interpreted in the context of the
(0.983) following limitations, which may offer avenues for future research. First,
CSRC/SC + (H5) 8.841***
using data available through Refinitiv Eikon’s database, the findings are
(0.836)
(Control variables) limited to the utilities included in such a database. Second, we measured
Size 2.774*** ESG disclosure using scores retrieved from the Eikon Refinitiv database
(0.475) and not directly from reports. Third, we focused on specific corporate
Profitability − 0.00940 governance attributes like board size, independence, gender diversity,
(0.0414)
CEO duality and a CSR/sustainability committee presence while dis
Leverage − 4.372
(3.918) regarding other potential corporate governance mechanisms that could
Year FE Included influence ESG disclosure levels. Fourth, this study did not consider
Country FE Included contextual factors with a moderating or mediating effect on the rela
Sector FE Included
tionship between corporate governance and utilities’ ESG disclosure.
Constant − 43.84***
(12.09) Therefore, future research may consider triangulating ESG disclosure
σu 18.24*** using a different database (e.g. Bloomberg) and aim to increase the
(0.890) number of utilities observations. Alternatively, automated software
σe 7.765*** could extract ESG information directly from non-financial reports.
(0.157)
Extending the analysis to other corporate governance mechanisms like
ρ 0.805
Observations 1750 audit committees or board diversity characteristics would also be
Number of ID 265 interesting. Last, future research should examine the moderating or
mediating effects of contextual factors like cultural differences or legal
systems on the relationship between corporate governance and ESG
achieving the Paris Agreement and SDGs targets. disclosure.
The study’s results also draw attention to managerial implications
regarding board composition. In particular, the outcome of this study
12
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Utilities Policy 82 (2023) 101549

Contents lists available at ScienceDirect

Worldwide evidence of corporate governance influence on ESG disclosure

utilities (1,750) from 35 countries. 3.2. Data analysis

Table 2 These results may be discussed in light of the theory of institutional

Fig. 1. Theoretical model.

the legitimising role of independent directors in utilities and their

Fig. 2. ESG disclosure trend.

examine the impact of five main corporate governance attributes (board

ascribed to the compelling need for utilities to employ ESG accounting as

period of regulations and quasi-regulations, utilities have also used ESG

From a practical perspective, this study’s results provide arguments

supporting policymakers and regulators like the European Financial

disclosure requirements that may lead utilities to increase their trans­

parency and accountability toward stakeholders. Particular attention

like the Securities and Exchange Commission (SEC) to continue their

recent efforts to regulate ESG disclosure. The new regulation proposed

by the SEC would require US-listed companies to disclose their Scope 1

companies to enhance their transparency to benefit investors and other

stakeholders. In line with this, governments and regulators worldwide

the importance of specific attributes of boards of directors in stimulating more

legitimacy for their environmentally sensitive operations that create appre­

hension among stakeholders and attract social and political scrutiny. In

particular, the study highlighted how appointing more independent members to

demands and address the sustainability concerns of all stakeholders through

higher transparency. Also, the presence of a specific CSR/sustainability com­

mittee is a strategy to assume a more strategic posture toward stakeholders and

sustainability issues helps utilities integrate social and environmental concerns

with emerging stakeholders’ concerns. Accordingly, our results have provided

legitimacy theory’s predictions, more women on boards and the separation of

regarding governance issues. Also, increasing the number of directors on the

board permits utilities to discharge more social and environmental information

Model (1) Model (2) Model (3) Model (4)

encourages utilities to define their internal corporate governance

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disclosure requirements that may lead utilities to increase their trans

legitimacy for their environmentally sensitive operations that create appre

higher transparency. Also, the presence of a specific CSR/sustainability com