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The effect of supply chain management

experience of a board member on the

environmental performance of the

company

Master thesis, MscSCM

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Abstract

This thesis examines the advisory role of the board of directors, based on the resource dependence theory, in order to influence a company’s environmental performance. The board characteristic under investigation, that can affect a company’s environmental performance, is the presence of a board member with supply chain management (SCM) experience. The BoardEx database is used to identify a board member with SCM experience. Using the Carbon Disclosure Project (CDP) data regarding greenhouse gas (GHG) emissions from the S&P 1200, Fortune-500 and Global Fortune-500, as a measurement for environmental performance, this thesis shows that the presence of board members with supply chain management experience results in lower direct company emissions, the indirect emissions are not affected. The results of this thesis contribute to current literature that companies which pursue a good environmental performance should consider hiring board members with experience in the supply chain management field.

Key words: Supply chain management, Environmental performance, Board members,

Experience.

Content

1. Introduction ...3

2. Theory ...6

2.1 Environmental performance: strategic market opportunities and institutional pressure ...6

2.2 Board of directors on environmental performance ...8

2.3 Experience of a board member on environmental performance ...8

2.4 Supply chain management practices on environmental performance ... 10

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1. Introduction

Production companies are under high pressure of new governmental legislation and new stakeholders’ demands regarding environmental sustainability (Sarkis and Zhu, 2018; Zhu, Sarkis and Lai, 2013), that is taking environmental concerns into consideration like for example producing products with less emissions (CO2) and the use of more renewable energy (e.g. solar panels). Nevertheless, a big proportion of companies still do not operate sustainably (Howes et al., 2017). Localized concerns about the environmental impact of supply chains and production networks have evolved to concerns of global distress (Sarkis and Zhu, 2018). In order to survive in the long run, companies should act in favor of the new legislations and stakeholders’ demands (Wilkinson and Gollan, 2001).

The department in a company where the most power lies in terms of decision making is the

board of directors (Forbes and Milliken, 1999). The board of directors are responsible for the

strategy of the company. They are the ones responsible for accepting and overseeing the implementation of new strategic targets, the system of governance and creating company culture (Hillman, Keim and Luce, 2001). Business ethics and corporate responsibility are also topics which a board places its emphasis on (Prado-Lorenzo, 2010). Boards are, in the end, responsible for the environmental strategies and therefore environmental performance of the company (Kassinis and Vafeas, 2006).

Existing literature shows that the advising role of board members to the managers is crucial in order to influence a company’s environmental performance (e.g. Cucari, De Falco and Orlando, 2018; Jizi, 2017; Post, Rahman and Rubow, 2011; Villiers, Naiker and Van Staden, 2011). The advisory role is based on the resource dependence theory which suggests that environmental experience of a board member (which can be called a ‘resource rich’ board member) can result in better counsel and advice regarding environmental issues to the management, which in turn lead to better decisions regarding environmental issues.

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company’s environmental performance in a good way. This has also been the result of the study

by Homroy and Slechten (2019).

These studies have in common that experience on environmental topics is important in the advisory role to the management in order to positively influence the environmental performance of the company. However, there are limitations of only taking environmental experience into consideration. Firstly, environmental experience is measured, for example, as environmental projects in the past of board members (key-terms: e.g. ecology, sustainability, environmental) that are only company oriented. What this approach misses, is that company environmental performance can also be influenced by operations/practices that are beyond the scope of just the company, that also takes the supply chain as a whole into consideration. Secondly, environmental experience also lies in operations/practices that are not primarily known as environmental enhancing practices, but can enhance the environmental performance (of company and supply chain). Experience in a specific field, which covers company and supply chain environmental issues, but is not primarily known for influencing environmental performance, is the field of supply chain management (e.g. logistics, transportation, eco-product design, purchasing, recycling) (Rao and Holt, 2005; Tate, Ellram and Kirchoff, 2010). Therefore, the board characteristic under investigation is the presence of a board member with

supply chain management experience. Furthermore, most of previous studies on environmental

performance use an aggregated score-based measure (KLD, to rank firms), negative environmental events (lawsuit, oil spills) or implemented environmental practices as a proxy for environmental performance (Ortiz-de-Mandojana et al., 2015; Villiers et al., 2011; Walls and Hoffman, 2013). This study uses a more comparable, quantitative measurement of environmental performance, namely the greenhouse gas (GHG) emissions, just like Homroy and Slechten (2019) do in their paper of board members with specific environmental expertise on environmental performance.

The research question which this thesis addresses is the following: What is the effect of the

presence of a board member with supply chain management experience on the environmental performance of the company?

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many studies that investigate environmental sustainability. The data to identify the presence of a board member with supply chain management experience will be used from BoardEx, which is used by many other studies that investigates board composition (e.g. Fracassi and Tate, 2012; Ferreira and Kirchmaier, 2013; Ferri and Maber, 2013). The sample comprises 232 companies from the S&P 1200, Fortune 500 and Global-Fortune 500 over a period of 2 years (2015 and 2017). This thesis will see if the presence of a board member with supply chain experience in 2015 will result in a better environmental performance in 2017.

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2. Theory

Firstly, this chapter will elaborate on what sustainable development is and why it is so relevant to investigate the environmental performance part of it. The relevance of the environmental part will be explained on the basis of strategic market opportunities which arise when a company performs good at the environmental performance which in turn can lead to competitive advantage, and risks that occur when a company does not comply with the current environmental legislation (institutional pressure) which could seriously harm the company. Given these opportunities and risks, the link is made that environmental performance should be a big objective of the board of directors. Then, board composition literature on environmental performance is analyzed and this chapter will end with hypothesis on how supply chain management experience of a board member can influence the environmental performance of the company.

2.1 Environmental performance: strategic market opportunities and

institutional pressure

The most cited definition of sustainable development is: ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (United Nations General Assembly, 1987, p. 43). Unfortunately, this definition is not concrete for businesses to apply and provides no specific guidance what elements are comprised in this definition. Therefore, this broad definition of sustainability is operationalized by Elkington (1998) with the triple bottom line definition which takes economic (financial, e.g. margins, profit/loss), environmental (environmental impact, e.g. pollution) and social (labor, e.g. fair salaries) performance into consideration, simultaneously. This operationalization of sustainability means that a company should not only engage in economic and socially responsible behavior but also that environmental gains can be accomplished in the process. This thesis focuses on the environmental part of the triple bottom line definition, and is in literature referred to with terms as ‘Corporate Social Reporting’ (CSR) and ‘environmental performance’. This thesis uses the term environmental performance.

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environmental impact of their operations (e.g. pollution). While these stakeholders’ expectations increase, strategic opportunities can be identified in order to obtain competitive advantage (Hart, 1995). For example, Berrone and Gomez-Mejia (2009) and PriceWaterhouseCoopers (2008) show that there is a significant increase in demand for products which are produced more environmentally friendly. Also, when a company performs good at the environmental performance, the employee turnover can and operating costs be decreased and access to resources can be improved (Berrone and Gomez-Mejia, 2009).

Event though, there are various opportunities which in turn could lead to a competitive advantage, most companies do not voluntarily implement programs which can improve a company’s environmental performance since environmental programs are complex, require large capital expenditures, require specific company capabilities (Bansal and Gao, 2008; Collins, Lawrence, Pavlovich and Ryan, 2007; Opoku and Ahmed, 2014). Therefore, governments from all over the world agreed upon regulations which entail ‘codes of ethics’ regarding environmental sustainability in order to initiate environmental development at companies. An example of a regulation at global level is the ISO 14001 (International Organization for Standardization) introduced in 1996 (ISO 14001-1996). This ISO standard represents a list of norms regarding environmental issues which companies should account for in their daily operations. Furthermore, there are also regulations which are only applicable in a specific country like the ‘Companies act 2006’ introduced in the UK (Alcock, Birds and Gale, 2007). This regulation compels companies to report about their corresponding company greenhouse gas emissions.

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seriously harm a company. Risk mitigation, complying with environmental standards by implementing environmental enhancing practices, is thus a serious strategy regarding these institutional pressures.

Given the institutional pressure and strategic opportunities which are related to a company’s environmental performance, environmental performance should be an objective for the board

of directors.

2.2 Board of directors on environmental performance

Existing literature on board composition shows that the composition of the board of directors is a predictor of a company’s environmental performance (e.g. Villiers et al., 2011; Ortiz-de-Mandojana et al., 2015; Walls and Hoffman, 2013; Post, Rahman and Rubow, 2011; Cucari et al., 2018; Jizi, 2017). Board members are primarily tasked with two key-roles, namely the

monitoring and resource provision role to senior management (Fama and Jensen, 1983; Adams,

Hermalin and Weisbach, 2010). The monitoring role, based on the agency theory, has been researched extensively on how it can influence a company’s environmental performance. Example given, Post et al. (2011) show that the proportion of outside directors is related to a better environmental performance since these directors provide superior governance (Core, Holthausen, and Larcker, 1999; Dahyaa and McConnell, 2004) because they can monitor managers’ behavior better compared to inside directors and can therefore intervene better when they see managers behave opportunistically. Furthermore, Villiers et al. (2011) show that higher director independence and fewer directors appointed after the CEO also affects the monitoring role in a positive way in order to perform better at the environmental performance dimension. Though, directors who hold shares, or share the CEO-role (CEO chair duality) seem to have no effect regarding the monitoring role on environmental dimension (Villiers et al., 2011).

This thesis takes the advisory role of board members, based on the resource dependence theory, into consideration. Next section will elaborate on this.

2.3 Experience of a board member on environmental performance

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Dependence Theory (RDT), Pfeffer and Salancik (1978) identified key methods through which a director can improve a company’s access to resources. These methods comprise: providing advice and counsel, open information channels beyond the boundaries of the firm and accomplish preferred access to outside resources. Also, Hillman et al. (2000) provide a classification for directors, based on the RDT, on their resource contribution. They can be classified in the role of support specialists, business experts and community specialists. Various studies support these roles (e.g., Hillman et al., 2009; Kroll, Walters and Le, 2007; Kroll, Walters and Wright, 2008). The RDT suggests that board members facilitate access to resources while taking active involvement in order to influence the strategy and programs positively (Hillman and Dalziel, 2003).

It has been argued by Kor and Misangyi (2008) that inexperienced managers can be supplemented by experienced directors in order to make strategic decisions related to major investments. Similarly, Carter and Lorsch (2004) and Kroll et al. (2007), show that companies can benefit from advice and counsel of directors with industry experience and relevant knowledge, especially when the legislation and technology is complex. This experienced director facilitates access to relevant information and resources from within the corresponding industry (Carpenter and Westphal, 2001) and moreover, they help establishing critical resources and start novel relationships (Hillman and Dalziel, 2003). Furthermore, a study by Kor and Sundaramurthy (2009) shows that experience-based human and social capital is significantly important in the resource provision role of directors in the board.

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2.4 Supply chain management practices on environmental performance

Supply chain management practices focuses not only on improving company performances but takes the influence on the supply chain also into consideration (Kim, 2006). Which means that the scope of supply chain management practices goes beyond only the company’s boundaries, which is a key distinction with other practices in other fields (are company focused). The following paragraphs will explain how supply chain management practices can influence the environmental performance.

A company’s supply chain management capabilities and a fitting supply chain management

strategy provide opportunities and the necessary support in order to engage in successful

environmental programs. Previous studies identified various practices with a supply chain management footprint (e.g. purchasing, recycling, eco-product design, logistics, transportation) which can act as enablers for a better environmental performance of the company (Rao and Holt, 2005; Tate et al., 2010). For instance, Walmart showed in their corporate social responsibility report to what extend they participated in practices across the supply chain, like supplier management, new product design, reduction of packaging materials, development of new packaging materials which are more environmentally friendly etc. and the diminishment of energy and water use in their operations (Wal-Mart Inc., 2016).

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2.5 Hypothesis

Managers that are facing strategic decisions regarding major investments and/or are technically

difficult and/or should meet governmental legislation, can benefit from the advice and counsel

of an experienced board member (Carter and Lorsch, 2004; Kor and Misangy, 2008; Kroll et al., 2007), based on the resource dependence theory developed by Pfeffer and Salancik (1978). Since environmental programs satisfy these conditions (these programs require major investments, are complex and should meet environmental legislation (Bansal and Gao, 2008; Collins, Lawrence, Pavlovich and Ryan, 2007; Opoku and Ahmed, 2014)), companies can therefore benefit from the advice and counsel of board members which have specific environmental experience (Homroy and Slechten, 2017). This thesis takes supply chain management experience of board members into consideration since supply chain management practices are identified as practices which can act as enablers of a company’s environmental performance (Rao and Holt, 2005; Tate et al., 2010). Board members with supply chain experience are then, likely able to identify opportunities regarding environmental issues and risks, and can therefore advice and counsel management regarding these issues in order to manage them properly. Therefore, the following hypothesis is developed:

H1: the presence of a board member with supply chain experience will have a positive effect

on the company’s environmental performance.

Presence of a board member with supply chain management experience

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3 Methodology

3.1 Research design

This thesis uses secondary data, collected by the Carbon Disclosure Project (CDP), BoardEx and Compustat, in order to see what the effect is of the presence of a board member with supply chain experience on the environmental performance of the company.

The CDP database is well-known as a reliable and comprehensive database regarding climate change management of companies which is used by many studies (e.g. Andrew and Cortese, 2011; Ben-Amar, Chang and Mcllkenny, 2017; Matisoff, Noonan and O’Brien, 2013). The main aim of this CDP project is to ‘build a truly sustainable economy by measuring and understanding their environmental impact’ (CDP.net).

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Tate, 2012). This thesis uses BoardEx data regarding the: director titles and roles (independent variable), number of board members (control variable) and gender ratio (control variable). The Compustat database is primarily focused on the financials of companies and therefore wildly used in studies that use variables as revenue, assets, profit, R&D (e.g. Ellinger, Ellinger, Yang and Howton, 2002; McWilliams and Siegel, 2000). This thesis uses Compustat data regarding revenues (control variable).

3.2 Sample

This thesis uses a sub-sample of the CDP-dataset. The population of this study are the S&P 1200, Fortune-500 and Global Fortune-500 companies. The S&P 1200 list comprises companies around the world that are selected on their market capitalization (=market value). The Global Fortune-500 and Fortune-500 lists comprise the 500 biggest companies of the world and of the US respectively, which have the highest revenue in a year. The reason why these S&P and Fortune companies are selected, is because these are very large companies which feel the institutional pressure regarding environmental sustainability and they all have board of directors which lead the company.

It is a common approach to use a time lag in order to see what the effect is of the independent variable on the dependent variable. In research on environmental performance, most used time lags are the one and two-year lags. Example given, Walls and Hoffman (2013) and Villiers et al. (2011) use a time lag of one-year, Pagell and Gobeli (2009) use time lag of two-year. There is no ‘ideal lag’ and therefore, a two-year lag is used in this thesis. The independent variable (presence of board member with supply chain experience) will be used from year 2015, and the dependent variable (environmental performance) will be used from 2015 and 2017.

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Secondly, control variables from the CDP, BoardEx and Compustat databases were matched with the corresponding companies, also using the ISIN numbers of companies and the v-lookup function in excel.

Lastly, I had to deal with missing values (regarding the independent, dependent and control variables), wrongly entered data (dependent variable: e.g. same emissions accounted for in 2015 as in 2017) and extreme values (dependent variable: e.g. extreme increase in emissions 2015 vs 2017, 5000%). I used strategies which are suggested by Fox-Wasylyshyn and El-Masri (2005) in order to cope with these issues, in the following way: Companies in the dataset, that have missing values and/or wrongly entered data and/or extreme values regarding the

independent and/or dependent variable, were deleted from the dataset since this data represents

the main relationship. In order to tackle the missing values for the control variables, I calculated the average of the entered data, and replaced the missing values with the average.

These steps result in the final dataset with a sample of 232 companies.

3.3 Construct measurement

Independent variable

The independent variable, the presence of a board member with supply chain experience, is measured based on the paper of Hendricks, Hora and Sinhal (2015). This paper used keywords, which cover supply chain management functions, in order to identify a member with supply chain experience. The keywords which cover SCM functions are: ‘logistics’, ‘distribution’, ‘procurement’, ‘purchasing’, ‘operations’ and ‘supply’. Every company that possesses a board member with a ‘function title’ or ‘role description’ as one of the keywords, is coded 1, all other companies are coded 0.

Dependent variable

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electricity that is purchased or otherwise brought into the organizational boundary of the company. Scope 2 emissions physically occur at the facility where electricity is generated’ (WBCSD/WRI, 2004). Adding the scope 1 and 2 emissions result in the total company

emissions. This calculation of total company emissions is based on the study of Doda,

Gennaioli, Gouldson, Grover and Sullivan (2016) which also use the CDP scope 1 and 2 emissions data in order to obtain the total company emissions.

Companies can be supported by guided documents which are provided on the CDP website, live webinars on the website and several workshops at specific locations, in order to fill in the CDP questionnaire. Regarding the scope 1 calculations, it is very straightforward to calculate these emissions and when companies need support, there are various support mechanisms. For calculating the scope 2 emissions, it is different since companies get the choice of calculating the scope 2 emissions based on the market-based and/or location-based method. Brander, Gillenwater and Ascui (2018) show in their study that the market-based calculation method is misleading because this method uses grid emission averages as vectors to calculate the scope 2 emissions. In comparison, the location-based method is more precise and uses the actual emissions and is therefore the recommended calculation method. This thesis only considers companies that fill in their scope 2 emissions calculated based on the location-based method. The questions which are used regarding the scope 1 and scope 2 emissions are shown table 1:

Table 1: questions regarding scope 1 and scope 2 emissions

Control variables

The following control variables are considered in this thesis, based on previous research:

Gender ratio – Jizi (2017), Post, Rahman and McQuillen (2014) and Post et al. (2011) show

that the presence of female board members is linked to a better environmental performance. The underlying argumentation is that female board members possess a ‘more favorable’ attitude towards environmental topics compared to male board members, which in turn leads to better establishment of ethical practices.

Question Scope 1 and 2 Emissions Data

CC8.2 Please provide your gross global Scope 1 emissions figures in metric tonnes CO2e

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Board size – Board size has been identified by Villiers et al. (2011) as a predictor of

environmental performance since larger boards possess more experience which in turn leads to better advise to the management in order to influence the environmental performance positively. The number of board members is used as a proxy for board size.

Firm size – Bigger companies tend to feel more expectations from various stakeholders:

government, consumers and shareholders. Therefore, they disseminate more information regarding their environmental practices, have more resources compared to smaller firms and are therefore more capable of meeting stakeholders’ expectations (Elsayed, 2006). Revenue is used as a proxy for firm size, consistent with the work of Giannarakis Zafeiriou and Sariannidis (2017) and Tauringana and Chithambo (2015).

Industry – Cho and Patten (2007), Halme and Huse (1997) and Patten (2002) show that

companies which operate in sensitive industries (which have a big impact on environment) are likely to disclose more information regarding their environmental performance and manage these environmental issues better. Environmental sensitive industries are identified by these studies as those industries with a SIC code as shown in the following table. I developed the ‘industry-variable’ where sensitive industries are coded with a 1 and the others a 0. This is also the method used by Villiers et al. (2011).

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3.4 Statistical methods

As presented in table 3, 60 of the 232 companies in the sample have a board member with supply chain management experience on the board. Subsequently, the descriptive statistics are shown in table 4. The variables ‘DeltaTotalEmission, ‘SCMmember’, ‘Industry’, ‘Company size’ and ‘Board size’ are positively skewed, the other ones are symmetrically distributed. Furthermore, there is no multicollinearity between the variables (correlations < 0,08) (Franke, 2010), which means that the correlations between variables will not harm the analysis in this thesis.

In order to test the research hypothesis, ‘the presence of a board member with supply chain experience will have a positive effect on the company’s environmental performance’, a multiple

regression analysis is performed since this is considered as a suitable research method for analyzing the effect of one independent variable on one depend one (while controlling for control variables) (Seber and Lee, 2012).

Three analysis will be performed. The first analysis (analysis I) shows if the presence of a board member with supply chain management experience influences the total company emissions, over a lag of two years. This answers the main hypotheses. The change of total emissions (total emissions=scope 1 + scope 2), which is used as dependent variable in analysis I, is calculated as follows: 𝐷𝑉 𝑖𝑛 𝑎𝑛𝑎𝑙𝑦𝑠𝑖𝑠 𝐼: -𝑇𝑜𝑡𝑎𝑙𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 2017 − 𝑇𝑜𝑡𝑎𝑙𝐸𝑚𝑖𝑠𝑖𝑠𝑜𝑛𝑠 2015 𝑇𝑜𝑡𝑎𝑙𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 2015 9 × 100 = 𝐷𝑒𝑙𝑡𝑎𝑇𝑜𝑡𝑎𝑙𝐸𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 Total companies 232 Without SCMmember = 0 172 With SCMmember = 1 60 Table 3 Table 4

* Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed).

Variables Mean St.deviation 1 2 3 4 5 6 7 8

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Furthermore, this thesis performs additional separate analysis on the individual scopes 1 and scope 2 emissions. Doda et al. (2016) only consider the total company emissions (scope 1 and scope 2) which limits their results to only the total emissions as the dependent variable. This thesis also considers multiple regression analysis on the scope 1 and scope 2 emissions. The reason why these scopes are taken separately is because this can contribute to current research to show if the scopes are evenly or differently influenceable. Analysis II considers the multiple regression analysis regarding the presence of a board member with supply chain experience on the change in scope 1 emissions (DeltaScope1) and analysis III considers the multiple regression analysis regarding the presence of a board member with supply chain experience on the change in scope 2 emissions (DeltaScope2). DeltaScope1 and DeltaScope2 are calculated as follows:

𝐷𝑉 𝑖𝑛 𝑎𝑛𝑎𝑙𝑦𝑠𝑖𝑠 𝐼𝐼: -𝑆𝑐𝑜𝑝𝑒1 2017 − 𝑆𝑐𝑜𝑝𝑒1 2015

𝑆𝑐𝑜𝑝𝑒1 2015 9 × 100 = 𝐷𝑒𝑙𝑡𝑎𝑆𝑐𝑜𝑝𝑒1

𝐷𝑉 𝑖𝑛 𝑎𝑛𝑎𝑙𝑦𝑠𝑖𝑠 𝐼𝐼𝐼: -𝑆𝑐𝑜𝑝𝑒2 2017 − 𝑆𝑐𝑜𝑝𝑒2 2015

𝑆𝑐𝑜𝑝𝑒2 2015 9 × 100 = 𝐷𝑒𝑙𝑡𝑎𝑆𝑐𝑜𝑝𝑒2

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4 Findings

The result of the multiple linear regression of analysis I, of the presence of a board member with supply chain experience on the delta total company emissions, is presented in table 5. The control variables are not significantly related to the delta company emissions. Also, the results show that there is no significant relationship between the presence of a board member with supply chain experience and the delta total emissions over a 2-year lag (β=0,044, p>0,05). Therefore, the results of analysis I show that H1 is not supported.

Variables Model 1 Model 2

Board size -0,143 -0,128 Gender Ratio -0,080 -0,081 Company size 0,005 0,001 Industry -0,68 -0,67 SCMmember -0,054 R2 0,026 0,029 R2 adjusted -0,004 -0,009 R2 change 0,026 0,003 F 0,878 0,769 F change 0,878 0,354 Table 5: Analysis I

Dependent variable: DeltaTotalEmissions

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The result of the linear regression analysis II, of the presence of a board member with supply chain experience, on the delta scope 1 emissions is presented table 6. Model 1 shows that the control variables are not significantly related to the scope 1. More interestingly, when the independent variable ‘SCMmember’ is added (model 2), the significant negative beta value shows that the presence of a ‘SCMmember’ results in lower scope 1 emissions (β=-0,169, p≤0,05). Also, by adding the independent variable, R2 increases significantly which means that more variance is explained by the model. The results of table 6 show that H1 is partially supported.

Variables Model 1 Model 2

Board size -0,159 -0,103 Gender ratio -0,052 0,045 Company size 0,054 0,039 Industry -0,086 -0,085 SCMmember -0,178* R2 0,045 0,073 R2 adjusted 0,019 0,041 R2 change 0,045 0,028 F 1,718 2,287 F change 1,718 4,403

Table 6: Analysis III

Dependent variable: DeltaScope1Emissions

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The results of the linear regression analysis III, of the presence of a board member with supply chain experience on the delta scope 2 emissions, is presented in table 7. The analysis shows that there is no significant relationship between the presence of a board member with supply chain experience and the delta scope 2 emissions over a 2-year lag (β=0,115, p>0,05). Also, the control variables are not significantly related to the delta scope 2 emissions. Table 7 shows that there is no support for H1.

Overall, based on these findings I can conclude that the main hypothesis is not supported since the presence of a board member with supply chain experience does not result in a significant decrease of the total company emissions over a lag of two years (β=0,044, p>0,05). However, the results regarding the change in scope 1 emissions shows a negative significant effect (β=-0,169, p≤0,05) which suggests that these emissions can be influenced by the presence of a board member with supply chain experience. Therefore, H1 is partially supported. Though, the results suggest that the scope 2 emissions cannot be influenced by presence of a board member with supply chain experience (β=0,115, p>0,05).

Variables Model 1 Model 2

Board size -0,006 0,005 Gender ratio -0,083 -0,084 Company size 0,035 0,031 Industry 0,124 0,125 SCMmember -0,042 R2 0,021 0,022 R2 adjusted -0,009 -0,016 R2 change 0,021 0,002 F 0,687 0,590 F change 0,687 0,217

Table 7: Analysis IIIII

Dependent variable: DeltaScope2Emissions

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5 Discussion

A rich literature on board composition shows that there is a considerable interest in enhancing our understanding on how the composition of a board of directors, with the presence environmental experienced board members, can influence the environmental performance of a company, through a board members’ advisory role to senior management (e.g. Cucari et al., 2018; Jizi, 2017; Villiers et al., 2011; Walls and Hoffman, 2013). This thesis provides several interesting outcomes on how supply chain management experience of a board member can contribute to current knowledge.

The first analysis (I) shows that the presence of board members with supply chain management experience does not result in significantly lower company emissions over a lag of two years, and therefore H1 is rejected. Doda et al. (2016) also find that the total emissions, calculated the same way as in this thesis, are not influenced by implementing environmental practices. A possible explanation on why the total emissions are not influenced as expected (H1) is that the total company emissions are the sum of two different kind of emissions, which are not equally influenceable, namely the scope 1 and scope 2 emissions. In order to identify if there is partial support regarding H1, two separate analysis are performed on the scope 1 and scope 2 emissions. These analyses show interesting results.

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6 Conclusion

As companies struggle with environmental development, it would require the presence of a board member with environmental experience in order to mitigate the risks of not complying to environmental legislation, and recognize opportunities which could lead to competitive advantage when environmental programs are implemented successfully. This board member can therefore develop a fitting environmental strategy and advise senior management regarding environmental issues in order to lead the company into an environmentally friendly future. This thesis shows that board members, with supply chain management experience, can influence the environmental performance of the company since supply chain management practices are identified as environmental performance enabling practices. Board members influence the environmental performance through its advisory role to senior management which is based on the resource dependence theory. The main findings are that the presence of a board member with supply chain management experience can influence the direct company emissions which occur at the company owned and controlled resources, but that the indirect emissions, which occur at other companies that produce the purchased electricity, cannot be influenced.

Managerial implications

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Limitations and future research

This study has some limitations which limits the generalizability but offers suggestions for future research. The CDP collects data based on voluntary disclosure from companies. Goma and Leung (2013) show that companies that perform superior on GHG emissions are more likely to disclose on their GHG emissions. A suggestion for future research could be to use emissions data from company reports regarding industries which are obliged to report their corresponding GHG emissions. Furthermore, the emissions are calculated by the company itself and self-reported data is seen as less trustworthy. Third party validation could be considered in order to improve data quality.

For now, this study shows that the scope 2 emissions cannot be influenced by a board member with supply chain experience. A suggestion for future research could be to investigate if scope 2 emissions can be reduced by for example partnerships, collaborations and/or take-over of the electricity producing company.

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