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Stakeholders in the Boardroom: Does Inclusion of a Customer and a Supplier on Firms' Board of Directors Impact Their Environmental Performance?
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DOI：10.1111/jbl.70064.png)
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Abstract
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Governance choices made at the board level could potentially impact environmental outcomes for the firm, yet little is known about how stakeholder connected directors shape such outcomes. This study examines how customer on the board (COTB) and supplier on the board (SOTB) differentially influence corporate environmental performance. Drawing on stakeholder theory, we argue that COTBs amplify environmental initiatives by channeling market-based pressures for sustainability, whereas SOTBs exert a more ambivalent influence: while their operational expertise can facilitate environmental improvements, their emphasis on efficiency and cost control may crowd out environmental priorities. We further theorize that these effects are contingent on supply-chain and financial pressures, including cost-of-goods-sold (COGS) intensity, sales volatility, and leverage. Using panel data from 306 B2B firms in the S&P 900 index between 2007 and 2013 (2043 firm-year observations), we find that COTB representation is positively associated with environmental performance, particularly under heightened market uncertainty, whereas SOTB representation is associated with weaker environmental outcomes when cost and financial pressures are high. These findings highlight how structurally embedded stakeholder ties on corporate boards shape the trade-offs firms make between environmental and economic objectives, offering guidance for boards seeking to align sustainability goals with operational and financial realities.
Keywords:
customer on the board
environmental performance
stakeholder theory
supplier on the board
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