Research-Thesis: Board Composition and Its Influence on Circular Economy Strategy

Abstract

This study examines the relationship between board composition and circular economy strategy adoption using a balanced panel of 1,525 internationally listed firms across 22 countries and six sectors over the period 2018 to 2022. Four board-level governance characteristics are investigated: board gender diversity, board independence, CEO duality, and the presence of a CSR/Sustainability Committee. The dependent variable is a multidimensional Circular Economy Index constructed from six binary dimensions sourced from Refinitiv Eikon, spanning the full spectrum from operational practices, including waste reduction, energy efficiency, and water efficiency, to strategic initiatives, including eco-design, renewable energy transition, and product take-back and recycling. Drawing on agency theory, resource dependence theory, stakeholder theory, upper echelons theory, and socialization theory, four directional hypotheses are formally derived and tested using a two-way firm-and-year fixed effects estimator with lagged governance variables to address reverse causality concerns. Two robust findings emerge. The presence of a board-level CSR/Sustainability Committee is the strongest and most economically significant governance driver of CE adoption, with an effect that survives both firm fixed effects and the lagged robustness check, providing credible causal evidence of a substantive governance mechanism. Board gender diversity exerts a positive and statistically significant contemporaneous effect, consistent with upper echelons theory and socialization theory. Board independence and CEO duality do not independently predict CE adoption once firm-level heterogeneity is controlled for, suggesting that governance quality and board orientation matter more than formal structural characteristics. The findings carry clear implications for corporate boards, policymakers, and institutional investors seeking to accelerate the circular economy transition through governance design.