Sustainability (Is Not) in the Boardroom: Evidence and Implications of Attentional Voids

Abstract

Strategic leadership and corporate governance scholars have long been interested in how boards of directors make decisions pertaining to important strategic issues that can have a material impact on their organizations. To date, however, research on board decision-making, especially as it relates to issues of corporate social responsibility (CSR), environmental management, or sustainability, has concentrated almost exclusively on structural, demographic, or ownership factors of boards and their impact on various aspects of corporate social or environmental performance. Even still, many reputable corporations with exemplary corporate governance structures continue to make questionable strategic decisions with regards to environmental sustainability. As such, this research seeks to look into the “black box” of corporate governance to understand exactly how boards of directors are dealing (or not) with issues related to environmental sustainability. To do so, we conducted a series of qualitative interviews with directors and were surprised to find that social and environmental sustainability was simply not debated in the boardroom. Using an attention-based view of the firms (ABV), we present a process-based model that explains this phenomenon and introduce the new construct of attentional voids so as to contribute to our understanding of governing for social and environmental sustainability.

1. Introduction

The social and environmental context of business is changing rapidly and dramatically. With the global population forecast to exceed 9 billion people by 2050, food, energy, and water scarcities are becoming urgent realities. For organizations, climate change is accelerating issues, such as supply-chain security, higher costs of raw materials and resources, and the increased likelihood of physical damage due to greater exposure to natural disasters, not to mention unpredictable regulatory and legal requirements around carbon and GHG emissions [1]. As these trends collide, a perfect storm is brewing—where population migration, national protectionism, and geopolitical conflict are all on the rise—placing unprecedented stress, not only on people and ecosystems, but also on the very survival of businesses as they learn to operate in this increasingly volatile and uncertain context.

Even still, most businesses continue to sleepwalk into a sustainability disaster [2]. For example, the World Economic Forum has designated the failure to mitigate and adapt to climate change as one of the most significant risks to business in the near future [3]. The Economist Intelligence Unit estimates the cost of this inaction to be, at minimum, USD 4.2 trillion in the next decade, and Citibank is warning that climate change inaction could total USD 44 trillion in losses by 2060 [2]. However, despite the numerous calls for a change in corporate behavior, corporate GHG emissions have instead grown by about 75% since 1970, with the largest emitters being the energy, agricultural, and industrial sectors [4]. In fact, only 42% of all Fortune 500 companies have even set GHG reduction targets [5].

This gap between the urgent need for corporate climate change action and the glacial pace of implementation is our area of inquiry, with a particular focus on the role of corporate boards. Boards have a fiduciary duty, as well as the duty of care, to protect the firm and its shareholders from undue risk. It is the role of the board to challenge top management’s strategic plans to ensure that these are in step with changes in the social, technological, environmental, economic, and political contexts. The scale and scope of the risks associated with climate change should, therefore, trigger discussions of corporate readiness for change and lead to swift and radical changes in corporate strategies. Even still, when it comes to climate change specifically, or sustainability initiatives more generally, there appears to be a blind-spot in the strategic decision-making processes on most of the boards that continue to single-mindedly prioritize financial returns over social and environmental risks. For example, only 1% of board members believe that sustainability should be a top-three focus for the board, and most directors do not put sustainability on the list of board priorities at all [6]. As a result, while the great majority (87%) of executives believe that their boards should play a strong role in their firm’s sustainability efforts, only 22% actually do so [7].

We argue that one of the reasons behind unsustainable organizational behavior in general and climate change inertia in particular can therefore be found by looking within the “black box” of corporate governance processes [8,9]. While there has been an explosion of research on the board–social/environmental performance link, we find that the majority of this work has concentrated almost exclusively on how structural issues related to the board (e.g., size, director independence, CEO duality, and committee presence) or demographic factors related to individual directors (e.g., functional background, gender, tenure, or age) impact corporate sustainability [10]. The role of other firm-level factors (e.g., prior performance and slack resources) and ownership structures (e.g., institutional ownership or shareholder concentration) have also been explored [11,12,13], primarily from an agency theory perspective that argues for increased board independence for more effective CEO and TMT (top management team) monitoring and, therefore, better corporate social performance [14]. However, this focus on board characteristics has diverted research attention away from important board processes that might influence the relationship between board structure, composition, and ownership patterns and sustainable, firm-level outcomes [9,15]. Rather, we know comparatively little about how boards actually make monitoring or oversight decisions regarding ethical, CSR, or sustainability issues. Qualitative research into board processes has been limited [16].

We tackle this issue as follows: We begin by reviewing the literature on corporate governance and corporate sustainability, broadly construed, to demonstrate that a great deal is already known pertaining to the structural and demographic antecedents of more-sustainable corporate decisions. However, this knowledge does not explain why so many reputable corporations with exemplary corporate governance structures continue to make questionable strategic decisions when it comes to implementing more socially and environmentally sustainable practices, and so we situate our study in an attention-based view (ABV) of the firm [17,18]. We then describe our qualitative, interview-based methodology before presenting our findings, our process-based model of sustainability governance, and a discussion pertaining to the implications of the presence of attentional voids at the board level. We conclude with limitations, future directions, and the implications of our contributions for both the corporate governance and sustainability literatures.

2. Literature Review

2.1. Corporate Governance and Sustainability

Strategic leadership and corporate governance scholars have long been interested in the relationship between a company’s board of directors and the firm’s performance [19]. While this interest has primarily been on the differential impact of various board characteristics on financial performance, scholars are increasingly investigating the link between corporate governance factors and corporate social and environmental performance as well [9,14,15,16]. Within this literature, various terms have been used to describe the policies, programs, and processes by which a business organization chooses to address its social and environmental obligations, such as corporate social responsibility (CSR) [10,20], corporate social performance (CSP) [21,22], corporate environmental performance (CEP) [23,24], sustainability [25], stakeholder management [26,27], and environmental, social and governance (ESG) factors [28], as well as a multitude of other similar constructs [29,30]. Although we acknowledge that each of these theories has important distinctions, the search for the empirical antecedents and outcomes of responsible firm behavior has become both conceptually and empirically confounded over the last few decades [30,31]. As such, this study seeks to understand how business organizations and their boards are addressing the sustainability issues, which may fall under the broader literature on CSR and/or environmental responsibility. Business sustainability is, therefore, defined as the ways in which an organization balances its financial, social, and environmental responsibilities [32], regardless of what this process is referred to in practice (e.g., CSR, CSP, CEP, ESG, stakeholder management, corporate citizenship, etc.).

Hence, building on previous reviews [14,29], we conducted a systematic review of the literature relating to corporate governance and CSR, broadly construed, to uncover over 85 empirical studies in this domain. Our review revealed several interesting findings. First, most corporate governance studies have used some broader form of CSR, CSP, CEP, or stakeholder management measure as a dependent variable, rather than “sustainability” per se, although the data and the theory often pertain to a phenomenon similar to that which we have alluded to. Second, research on the board–corporate social/environmental performance link has concentrated almost exclusively on the quantifiable impact of structural elements (board size, CEO duality, percentage of outsiders, stakeholder representation, or board committees), compositional factors (demographic backgrounds of directors or director network connections), or ownership structures (institutional investors, investment turnover, shareholder activism, or shareholder concentration) on firm-level corporate social and environmental performance [9], rather than on qualitatively investigating how and why boards engage (or do not engage) with social and environmental policies and practices [29]. We summarize these studies briefly here.

First, researchers have long been interested in how structural board elements, such as board size, CEO duality, and director independence, impact firm performance. Many studies suggest that the size of the board matters when it comes to corporate responsibility, arguing that larger boards offer more diverse perspectives that should strengthen their monitoring roles and lead to better CSR performance [21,23,33,34]. Results, however, have been mixed; while some studies have found no relationship between board size and CSP [21] or disclosures [35], others have found a positive association [10,33]. Paradoxically, it appears that larger boards are also more positively associated with negative CEP outcomes, such as environmental litigation [36] and environmental concerns [14]. These conflicting results suggest that the relationship between board size and CSP might not be as direct as predicted by agency or stakeholder theories.

Separating the CEO and chair positions on the board has also been theorized as strengthening the board’s oversight role, thereby increasing a firm’s CSR performance; even still, this relationship has also not been entirely empirically supported [21,37]. Again, while some studies have found a positive relationship between CEO duality and CEP [23,34], others have shown that a concentration of power in the position of the CEO is more likely to have a positive relationship on a firm’s CSR efforts [38].

Structural factors, such as board configuration, have also shown to have diverse impacts on CSR and CEP. For example, Hillman et al. [33] found that stakeholder representation on the board in not associated with stakeholder performance, while Kock et al. [24] found that having more stakeholders on the board improves a firm’s environmental performance. The proportion of independent directors has been linked to greater attitudes towards environmental protection [39], a greater degree of CSR and ESG disclosure [10,40] and better environmental performance [23,34]. Foreign boards have also been shown to engage in more CSR activities [41]. Lastly, the presence of different board committees, such as a CSR or an environmental or sustainability committee, have also been associated with a greater stakeholder orientation towards corporate governance [42], a greater commitment to SDG disclosures [35], and better social or environmental performance [37,43]; however, this support, too, has not been universal [44].

Second, a large body of literature has also emerged around the composition of the board of directors in relation to a firm’s ESG practices. In general, although not always [35,45], female directors tend to have a more positive influence on a firm’s social and/or environmental policies, practices, and performance overall [10,23,28,34,39,40,46,47,48,49,50]. For example, Jizi [10] found that female participation on boards is not only positively related to CSR engagement and reporting, but also to implementing specific social and environmental policies, such as energy efficiency, green building, and climate change policies. Similarly, the more gender-diverse a board is, the more positive the association with a firm’s ESG scores [28] and ESG disclosures [40], and the lower the firm’s environmental emissions [44,49], the greater the degree of environmental innovation [51] and the better its environmental performance [34,47,52,53]. Other demographic factors, such as a director’s legal [23] or financial [39] background, have also been linked to better attitudes towards environmental protection and/or CEP, while age has not [52].

Lastly, several other governance mechanisms, such as company ownership and CEO compensation arrangements, have also been shown to impact sustainability initiatives. TMT equity, for example, has been linked to increases in the product quality (but not people) dimensions of CSP [54]; however, CEO ownership equity alone is either unrelated [22] or negatively related to CSP [38]. In terms of compensation, research suggests that, the greater the level of overall CEO compensation, the lower a firm’s level of CSP [20,22,55], and this will decrease even more if CEOs feel that they are underpaid [27]. A long-term focus on CEO pay and equity-based managerial incentives is therefore required for positive changes in CSP and CEP [24,38,56].

As is evident from the above, our review of the literature revealed that there has been an almost singular focus on quantitative studies that rely on readily available datasets and easily measurable variables. Of the more-than 85 articles reviewed, only 9 were qualitative in nature, leaving a great deal unknown about the processes or mechanisms by which these quantitative variables (e.g., size and diversity of board) impact a firm’s social and environmental performance [15]. Given the mixed results, strategic leadership, upper-echelon, and agency theories have therefore proven to be unsatisfactory in explaining how firms govern for sustainability, and we are left with a gap in our understanding of how and why sustainability-related issues are raised and discussed (or not) at the board level.

2.2. Attention-Based View (ABV) of the Firmand Sustainability Governance

Applying the attention-based view (ABV) of the firm provides an alternate theoretical lens with which to understand organizational action and adaptation [17]; it posits that the ways decision-makers in organizations allocate their attention is heavily influenced by contextual factors and the structure of the decision-makers’ interactions. Grounded in the concepts of bounded rationality and selective perception first outlined by Simon [57] and then Cyert and March [58], the ABV describes the limitations that social actors face in their information-processing and calculation capabilities, and the subsequent implicit and explicit structures and routines that are developed in order to cope with this information overload [18].

Organizational attention is defined as “the noticing, encoding, interpreting, and focusing of time and effort by organizational decision-makers on both (a) issues: the available repertoire of categories for making sense of the environment; problems, opportunities and threats; and (b) answers: the available repertoire of action alternatives; proposals, routines, projects, programs and procedures” (p. 189) [17]. Accordingly, attention in organizations is based on three key principles—focus of attention, situated attention, and the structural distribution of attention. That is, the actions (or inactions) of decision-makers are based on the issues they focus their attention on (focus of attention); in turn, the issues on which decision-makers are focused depend on those actors’ particular contexts and situations at particular points in time (situated attention); and, finally, the decision-makers’ contexts and how they attend to them depend on the rules, resources, and social relationships within the firm, which regulate the “distribution and allocation of issues, answers and decision-makers into specific activities, communications and procedures (structural distribution of attention)” [17].

While the use of the ABV in understanding sustainability governance has been limited [59], several studies have suggested that it could be useful in explaining why and how firms respond to sustainability-related issues, such as climate change [60,61]. For example, Zhao and colleagues [62] demonstrated how the full set of corporate governance structures and mechanisms that constrain managerial discretion have a moderating effect on organizational attention to corporate social responsibility and corporate social performance. More recently, Galbreath [60] investigated the circumstances under which boards of directors influence corporate sustainable development (CSD). In this study of large, Australian firms, Galbreath found that the proposed attention-directing structures at the individual (environmental scanning) and group (stakeholder debate) level regulate the attention of the board with respect to CSD. His results suggest that environmental scanning is expected to focus a board’s attention to the “problems, opportunities, and threats” arising from economic, environmental, and social stimuli relative to the firm, allowing for a focus that is broader than just economic and financial matters, which then, as a consequence, may enable a richer and more-accurate stakeholder debate, leading to positive outcomes in terms of the strategic prioritization of CSD [60].

Given our research question regarding how boards are actually making monitoring or oversight decisions regarding sustainability issues, our study investigates whether and how attention to sustainability issues, as external, contextual stimuli, enter boardroom discussions in reality. Hence, we aim to extend research on the ABV into the corporate sustainability governance domain and investigate whether and how board members attend to concepts such as sustainability at all and by what means. Further, we aim to shed light on the quality of the sustainability debate happening at the board level to better understand the mechanisms that might enable sustainability to become a more central, strategic organizational issue.

3. Methodology

To answer the “how” and “why” questions geared at uncovering a process-related phenomenon, a qualitative lens is required. In addition, when past findings on a topic are sparse or uncover large discrepancies, as is the case with boards and decision-making processes around sustainability, a qualitative methodology involving inductive theory-building through specific, semi-structured interviews can provide a more-complete understanding of a phenomenon of interest than more-quantitative empirical research designs [63,64]. Semi-structured interviews are particularly useful as they can aid in surfacing unconscious mental processes in informants that would otherwise be impossible to obtain through alternate methods such as questionnaires or surveys [65].

For this study, we followed the qualitative methodology suggested by Gioia, Corely and Hamilton [64], which begins with the development of a flexible interview protocol, where interview scripts were created around the following themes: general operating context, sustainability at the company, sustainability discussions at the board level, the role of the board (vs. that of the CEO and the TMT), and future plans pertaining to dealing with sustainability issues at the organization. Importantly, we did not ex-priori define sustainability for the participant as it was crucial that the respondents first offer up their own interpretations of this contested construct in order to better understand how sustainability issues are perceived at the board level. Only after the participant’s own definition of sustainability surfaced did we provide a working definition for the remaining questions regarding the processes by which directors worked to monitor, oversee, and balance a firm’s financial, social, and environmental obligations. Lastly, we probed for critical incidents [66], if any, by asking participants to describe two examples in which a sustainability-related initiative (social or environmental, not financial, sustainability) was either approved or denied at the board level and to explain why they believed there were different outcomes in these instances. We concluded our interviews by asking our participants to retrospectively and prospectively reflect on the importance of social and environmental sustainability to the firms on whose boards they sit.

3.1. Recruitment and Sampling

Few qualitative studies have been performed in this domain, primarily because board members are generally considered to be an elusive target group [16,67,68,69]. Interviews with CEOs and board members are particularly difficult to secure given the organizational and financial time constraints associated with executive job demands [19]. Even still, the need for a better understanding of how boards make decisions regarding important strategic issues has been widely acknowledged [70]. To recruit participants, the first author used several personal and professional contact networks, netting 18 participants that either currently sit or have previously served on the for-profit corporate boards of Canadian (or the Canadian boards of international) businesses. This sample number is broadly in-line with, or greater than, published qualitative research using board members (e.g., Fernandez and Mezza, 2014: n = 26 [68]; Muyingo, 2015: n = 7 [71]; Jamali et al., 2008: n = 10 [72]; Knudsen et al., 2013: n = 8 [73]). While convenience sampling is often criticized for its negative effects on external validity, it is also the privileged approach in research on boards [68]. We used theoretical sampling to include board members from a wide range of risk-exposure industries—those that are both highly exposed to sustainability-related risks (e.g., mining and oil and gas) as well as those less exposed (e.g., banking)—to strengthen comparisons in the theory-building and increase the generalizability of the findings [63].

The interviews were conducted between 2016 and 2018, lasted an average of 60 min (with the shortest lasting 45 min and the longest lasting 1 h 15 min), and took place either in person or over the phone. As is common in qualitative research, our findings and analytical reflections prompted additional questions and probes which were added to the interview protocol as the interviews progressed. Participants were assigned a numeric pseudonym in line with the timing and order of interviews; each interview was digitally recorded with the approval of the interviewee and fully transcribed, resulting in a total of 306 pages of data.

3.2. Data Analysis

To analyze the data, we used an inductive approach built upon the constant comparison method [64]. The constant comparative method involves simultaneous coding, the naming of data fragments, and the analysis of data, comparing incidents to names and to other incidents, so as to saturate their properties in order to support the development of theory [74]. As such, multiple rounds of coding were used. First, using NVivo 11.0 software, the initial round of coding involved the iterative process of identifying and naming “the properties, dimensions, and boundaries of each initial and subsequent data category” (p. 251) [75], and then comparing those in order to identify similarities and differences in the data [76]. The objective of this initial coding phase was to maintain the integrity of the constructs by using the informants’ own voices and to develop a compendium of all of the terms used by the participants in discussing sustainability-related issues [64]. This initial coding was very detailed, resulting in a total of 98 codes.

In the second stage, the data was coded for second-order themes that could be extracted and assembled into overarching theoretical dimensions or a “data structure” [64] that delineated higher-order concepts [77,78]. It was in this step that we noted significant variations in the language that participants used to describe the importance of sustainability in the boardroom, which led us to the ABV [18]. The last step was then to find the dynamic relationships between the second-order concepts and this existing theory [64] to arrive at our process model of sustainability governance. Throughout this process, the corporate governance, ABV, and sustainability literatures were continually and iteratively consulted to refine the theory emerging from the data [64]. The strength of the inductive theory method described herein is that it provides for both rich descriptions and a deeper understanding of the phenomenon under investigation—decision-making processes regarding sustainability issues at the board level. Coding reliability was checked by three coders, the lead author and two research assistants [77]. The coders worked independently, paying careful consideration to how interviewees described strategic decision-making processes pertaining to sustainability issues at the board level.

4. Findings

As outlined above, we began our interviews by allowing our participants to describe, in their own words, how important sustainability was for the organizations on whose boards they sit. This question, in and of itself, yielded myriad interpretations as directors often struggled to define “sustainability” in general. Responses ranged from long explanations about financial sustainability and the difficulty of delivering persistent and consistent positive financial returns, to detailed discussions of how sustainability is so deeply embedded in the organizational culture and operations that it is not often discussed at the board level.

After offering a definition of “sustainability” that encompassed a firm’s broader responsibility to its social and environmental context (beyond a financial commitment to shareholders), participants were probed again about the importance of sustainability in the organizations on whose boards they sit. Even though most directors stated that to them, personally, sustainability was an important issue, less than half of the interviewees, that is, 7 out of 18, identified it as an important or salient concern for their organization. The remaining 10 interviewees stated that sustainability was simply not a priority for their businesses; these participants came from a host of different industries, including real estate, finance, hospitality, and transportation, and described their organization’s approaches to sustainability as “an issue, [that] I don’t hear come up” [#8] at the board level, or simply that sustainability is “somebody else’s issue” [#8].

Interestingly, none of the respondents stated that sustainability-related issues were debated as a separate agenda item at the board level. That is, regardless of whether participants described sustainability as highly salient to their business or whether they considered it irrelevant, the outcome remained the same—in general, there was a lack of discussion about sustainability-related issues at the board level. For instance, interviewee #17, who came from an organization where sustainability was not framed as a priority, said, “I’ve seen very little board engagement in this from my vantage point” [#17]. Yet similarly, interviewee #15, from an organization that deemed sustainability to be a top priority, stated that, while the board believes it to be an important issue, very little discussion surrounding sustainability actually happens during board meetings: “EHS&S committee met four times last year, and there was a 100% attendance of all the [board] members”, but, in reality, “when this stuff gets to the board, it’s usually already gone through so much review and sort of management work, that, if it’s a high enough priority that the board will likely just support it” [#15]. Similarly, interviewee #3 described the boardroom situation in this way: “what would get to the board, again, would be the fact that we did it [a sustainability-related action]. … They’re not going to discuss the direction, it’s just the result”. Importantly, no participant was able to describe a critical incident where a sustainability issue came to the board and was either approved or not approved and why, thus calling into question the whole literature on sustainability tensions and trade-offs [79].

Given this important finding pertaining to the lack of sustainability discussions at the board level, in the second round of coding, the analysis focused on identifying the steps in the decision-making process that influenced the lack of board involvement. We labeled this inattention to sustainability in the boardroom as an “attentional void”. If “attention” is defined as “the noticing, encoding, interpreting, and focusing of time and effort by organizational decision-makers on issues … and alternatives” (p. 189) [17], then an “attentional void” can be defined as “the absence of noticing, encoding, interpreting, and focusing time and effort on strategic issues and alternatives”.

Figure 1 depicts the data structure that emerged from our analysis, showing a representative sample of first-order, or “in vivo”, codes, using the interviewee’s own language to capture behaviors and processes. These codes were then used to construct the higher-order concepts described here as “secondary nodes” and “aggregate dimensions” [64]. We present our findings in light of the aggregate dimensions that emerged from our analysis: (1) issue perception, (2) situated attention, and (3) attentional structures. We begin by discussing each of these aggregate dimensions (and their secondary nodes) through the use of participant quotations and references to the literature before turning our discussion to the resulting process model of sustainability governance.

4.1. Issue Perception

A firm’s approach to CSR or sustainability is a strategic issue: “Strategy is always about making choices, and success in corporate social responsibility is no different. It is about choosing which social issues to focus on” [80]. How sustainability issues are perceived in the organization, therefore, has a direct impact on which issues are presented and discussed in the boardroom. For example, previous research has demonstrated the differential impact on strategic decisions that occurs if a social or environmental issue is perceived as an opportunity or as a threat [81,82], as certain or uncertain [83], as urgent or not urgent [84], or as proximal or distal to the firm [85]. However, our findings suggest that these issue-perception categorizations are secondary to the fundamental perception of sustainability issues as salient or not salient to the organization. Of our interviewees, 94% reported that conversations surrounding sustainability and decision-making occurs at the top management level (TMT), if it occurs at all, and it is rarely included in board-level discussions. Of the seven interviewees who perceived sustainability as highly salient to their organization, none could describe an instance where sustainability discussions or decision-making occurred at the board level. For instance, interviewee #2 stated that, while “the whole board sits through the sustainability meetings” [#2], the “ideas come from management, and then they say [to the board] this is what they’re looking at doing” [#2]. In this case, the interviewee used the words “approve” and “monitor” to describe the role of the board and that “decisions most boards make are obvious” [#2]. This chairman went on to say:

“I can’t think of anything that’s come to the board on sustainability that hasn’t gotten approved. Um… (long pause) I’m trying to think of something. I mean… as I say, we spend tens of millions on water quality issues everywhere.… But there’s never a lot of… there’s never any quibbling about should we do it, or shouldn’t we, or could we do it cheaper? It’s just: here are the water standards, here’s the plant we’re building. The clean water to those standards will cost $100 million. OK. Like there’s… There’s not… There’s nobody to… Who’s gonna push back?” [#2]

In contrast, the other 11 interviewees, who believed that sustainability-related issues and initiatives were simply not salient to their business, stated that “it is somebody else’s issue” [#8] and not their problem to deal with. For example, interviewee #12, from the financial industry, said that one way to measure the importance of an issue to the sector is to look at the subjects discussed at major national conferences and “very, very little has ever been said about any of these [sustainability] subjects at those conferences.”[#12]. We thus identified a dichotomous approach to the perception of sustainability issues as external stimuli—either as highly salient or not salient at all—and we identified that in the first stage in our model. Importantly, we did not find evidence that the perception of sustainability, as salient or not, was related to whether or not sustainability was perceived as an opportunity/threat, certain/uncertain, urgent/not urgent, or proximal/distal, as has been suggested in previous studies [84].

4.2. Situated Attention

According to the ABV, the issues that decision-makers focus on also depend on the actors’ particular contexts or situations at particular points in time, a concept called “situated attention” [17]. Our findings suggest that, within the context of the boardroom, and quarterly board meetings specifically, sustainability is not an issue that is focused on. Again, this stage in our process model suggests that, regardless of the level of importance attributed to sustainability issues, there was an absence of situated attention, but for divergent reasons. For the directors who worked for organizations where sustainability was perceived as highly salient, the sustainability issues were presented to the board as “fully integrated into everything we do” [#2]. This integration was described “as part of our standard due diligence checklist” [#6] and as is “part of our make-up, if you will, of anything we’re going to do [#6]”. For others, they described sustainability as so fundamental to their operations that “the reality is, these issues are so important that now the whole board sits through the sustainability committee meetings” [#2]. As such, there was no perceived need to divert board attention to sustainability issues specifically, as these were seen as part of the general operational decision monitoring and oversight processes that have dedicated attentional structures (e.g., checklists or separate committee meetings).

In contrast, for those directors who sat on boards that did not perceive sustainability issues as salient, these issues were brought to the board either very rarely (on average, once per year, as an informational item only) or not at all. In no instances were sustainability issues brought to the board for discussion/debate around “go/no go” decisions. In addition, the boards themselves did not engage in conversations around sustainability, for example, as a result of their own environmental scanning. That is, similar to the cases in which sustainability was fully integrated into operational procedures, no informant could provide an occasion on which the board spent board time debating whether or not to approve or deny a sustainability-related expenditure. In both scenarios, then, the boardroom context served to dilute any focus on sustainability topics.

4.3. Attentional Structures

The last stage of our process model of sustainability governance pertains to the attention structures—or the “rules, resources, players, and social positions of the firm” that serve to distribute attention focus [17]. For those board members whose firms interpreted sustainability as salient and, therefore, situated sustainability as integrated throughout their operations, the norms within the organization were such that sustainability issues did not need to go in front of the board for discussion/debate, but rather they were so core to their business that the issues were fully entrusted to the top management team and only came to the board as an informational item. For example, interviewee #9 described how “mining companies are going to go out of their way to demonstrate that they’re improving people’s lives and they’re improving the environment where they’re working in” [#9] because they could not operate without taking these measures. Sustainability is so critically important to operations that the board fully entrusts the issue to the TMT. Similarly, interviewee #16 described how the organization could not operate unless sustainability-related measures were in place, but due to the nature of board processes, the responsibility for sustainability issues is entrusted to the TMT. So, the board will “review it [sustainability issues] and they have input, but it comes from the bottom up” [#16].

For the other group of organizations whose director’s perceived sustainability as not salient to their organizations, their boards also lacked attentional structures to draw attention to sustainability issues. Ocasio [17] describes the role of attentional structures in generating issue priorities, communication procedures, and structured sets of important issues to motivate organizational action. Yet, for this group of companies, these attentional structures were completely absent. For example, interviewee #17 revealed that their board did not even discuss sustainability issues, stating that “I’ve seen very little board engagement in this,” and that “it’s not been my experience that they have been involved” [#17]. Interviewee #3 also stated that no interpretation of sustainability happens at the board level because “it’s very rarely discussed,” and that’s “the way we should behave, get it done and that’s it” [#3]. Similarly, interviewee #7 described how attentional structures that would allow sustainability to enter the boardroom simply do not exist because “there’s tons of things going on, and the board is again just trying to stay at the strategic level” [#7]. In these instances, the attentional structures that might focus director attention to sustainability issues are simply absent.

Most surprisingly, no participant was able to describe a single, critical incident where a sustainability issue came to the board that was either approved or not approved and why. If at all, discussions around sustainability seemed to happen at different and lower levels at the organization and did not enter any governance channel, thus preventing sustainability from becoming a board issue. For example, interviewee #3 described the boardroom situation as: “what would get to the board, again, would be the fact that we did it [a sustainability-related action] … They’re not going to discuss the direction, it’s just the result”. Similarly, interviewee #2 stated that, while “the whole board sits through the sustainability meetings” [#2], the “ideas come from management, and then they say [to the board] this is what they’re looking at doing” [#2]. In this case, the interviewee used the words “approval” and “monitor” to describe the role of the board and stated that the “decisions most boards make are obvious” [#2].

5. Discussion: Understanding Attentional Voids

Our findings suggest that two parallel streams of sustainability-issue-perception, situated attention and attentional structures, are present within the boards of organizations, and yet, these ultimately culminate in the same outcome—a lack of attentional engagement with sustainability, or an “attentional void” when it comes to sustainability in the boardroom. This finding of an “attentional void” is counterintuitive for various reasons. First, as outlined in the literature review, a large body of work has placed an enormous amount of attention on the structural elements of boards (size, independent directors, diversity, etc.) and their relationship to CSR and sustainability, as broadly construed [14]. This stream of research was such anathema to one of our interviewees, the chairman of large international mining company, that he scoffed at this whole body of work, suggesting that:

“academics seem to think that you can program this stuff [the relationship between the demographic composition of the board and firm outcomes]. And you can’t. I’ve been on boards for 30 years, and I’ve had lots of successes, and non-successes. I know how tough it is. And I can assure you, the number of women on a board is so irrelevant… It… You know, I think it’s great putting them on, but I tell you, it’s not going to change the outcomes. It’s not going to change the outcomes.” [#2]

Applying the ABV lens, it is not the demographic or structural attributes of the board that will ensure that sustainability issues are discussed and debated at the board level. Rather, our findings suggest that it is how the board members perceive sustainability issues that influences whether these are given any attention in the situation of a boardroom and/or if any attentional structures will emerge to support a focused allocation of attention towards understanding and resolving sustainability-related concerns. Thus, those directors who deem sustainability to be highly salient will put more effort and resources towards it than those who do not believe it is a priority in the form of integrating sustainability concerns into processes and procedures, as well as in designing attentional structures that ensure TMTs are paying sufficient attention to the impact of sustainability on operations.

For example, the directors of the five extractive industries, who stated that sustainability was at the core of their businesses, dedicated the greatest amount of time to sustainability at the board level, even if this were within the context of reviewing new or existing projects. On this topic, interviewee #2 stated that their organization spends 20% of its board meetings reviewing sustainability-related topics as a part of their general operational review of plans for new or existing mining operations. Similarly, interviewee #9 reported that sustainability is considered for every project “by default”. However, it is important to note that these sustainability issues are not presented to the board as trade-offs or tensions. When probed about critical incidents, or about sustainability projects that are approved, or not, by the board and why, participant #2 said:

“I’m saying they don’t get presented like that to the board. Because again, the difference between a good water system or a bad one, or a bad air system and a good one. It might be a couple of million dollars, but on a 2 billion investment, it’s not…[material]”. [#2]

The opposite is also true. Directors from organizations who believed sustainability was not salient to their business also did not discuss sustainability at the board level or design attentional structures that allowed for more-focused attention on sustainability issues, such that no time, or a very minimal amount of time, was dedicated to sustainability in the boardroom. This is evident in interviewee responses such as: “any talk of sustainability has yet to creep in [#16]” and board meetings are not spent reviewing sustainability-related activities.

Taking the climate change risks associated with global production systems as an illustrative example, our research suggests that we are likely to find two types of directors sitting on the boards of organizations—those who would see sustainability in the supply chain as a salient issue, and those who would not. It would follow, then, that those who do not interpret this issue as salient would not pay any “situated attention” to this matter, nor would they develop any “attentional structures” that would lead to discussions about climate change risks in the production system in the boardroom (hence, the attentional void). On the other hand, our theory would also suggest that even those organizations that do interpret sustainability in their production systems as highly salient, and have therefore integrated this into their decision-making processes, have nonetheless entrusted this to their top management teams so completely that they, too, may not discuss sustainability issues at the board level (hence, the same attentional void persists). The paradox of this finding is that both interpretations lead to the same outcome—the “attentional void”, which we previously defined as: “the absence of noticing, encoding, interpreting, and focusing time and effort on strategic issues and alternatives”. This insight could hence be generalized to help explain why other important issues (e.g., diversity, corruption, cyber-security, etc.) might also fall into an attentional void in the boardroom.

Figure 2 below illustrates our process model of sustainability governance that emerged from these findings. As is apparent, regardless of how an organization perceives, situates, or designs attentional structures around sustainability-related issues, the end result is the same: sustainability is not in the boardroom. This attentional void is important for various reasons. First, as described above, it calls into question the results of the many empirical investigations into the structural attributes of boards and their relationship to CSR or sustainability outcomes [14]. Second, it calls into question the work on cognitive tensions and perceived trade-offs in the managerial cognition literature [79], given that our qualitative data suggests that these tensions and trade-off discussions simply do not occur in the boardroom. Lastly, these findings are important given the broader discourse on corporate inaction relating to important sustainability considerations, such as climate change and resource scarcity [2]. While many sensemaking, cognition, or ABV models of sustainability management imply that more sustainable outcomes are possible with greater environmental scanning [60], issue awareness [2], or by framing sustainability as an urgent, proximal, controllable opportunity [84], our research suggests that this will not always manifest in sustainability discussions in the boardroom.

6. Contributions, Limitations, and Implications

The objective of this research was to go beyond the traditional, empirical corporate governance approach to understand exactly how boards are dealing with sustainability issues, such as resource scarcity and climate change, from a strategic decision-making perspective. Through semi-structured interviews with members of boards of directors, we induced a theoretical model of sustainability governance that bridges the literature on sustainability governance [14] and the ABV of the firm [17]. In so doing, we make the following contributions to both the corporate governance and sustainability literatures:

First, we answer the multiple calls for a better understanding of the relationship between corporate governance and sustainability [9,14]. Second, this paper also answers the call for more qualitative studies on boards, given the overreliance in the field on large-sample, quantitative correlational studies [9,16,86]. By taking a qualitative approach to corporate governance and sustainability, we open the “black box” of corporate governance processes [8,59,87] to uncover how and why sustainability is not integrated into the processes by which directors perceive, situate, and design attention structures relating to sustainability issues as external stimuli. Most importantly, our application of the ABV to corporate governance on sustainability issues allows us to introduce evidence for the concept of “attentional void” and theorize about the implications of these findings for governance practices. As a result, we present a more comprehensive, process-based model of sustainability governance that helps explain the sustainability imperative and sustainability implementation gap in practice.

Our study, however, is not without its limitations. We concede to the issues related to a small convenience sample of directors garnered from personal and professional contacts. While this is the norm in qualitative corporate governance research [68], it nonetheless limits the generalizability of our findings in that we cannot claim for certain that our sample is unbiased. Other qualitative studies employing board members as subjects suffer from similar limitations on the one hand, yet on the other, they offer rich insights into an otherwise-privileged and difficult-to-access research subject [68,71,72,73]. We believe that our study contributes to our knowledge of sustainability governance in a similar vein.

Despite these limitations, the process model of sustainability governance and the concept of attentional voids derived from this research nonetheless hold important implications for practice and research. For directors sitting on corporate boards, simply being aware of the role that issue perception has on the decision-making process could help bring salience to social and environmental risks if counter-biasing, mitigating tactics are employed [2]. For example, if the responsibility of the board is always framed in terms of “maximizing profits”, a switch in frame to “minimizing losses” could help foreground discussions about climate change [2]. With increased awareness, directors could then turn their attention to designing sustainability into the situated attention contexts by integrating, for example, sustainability checklists into monitoring and oversight processes. Lastly, attentional structures can be created to institutionalize the process of paying attention to sustainability matters. For example, making public commitments to carbon reductions goals and then tying these concrete objectives to CEO performance scorecards [2] would ensure that boards avoid the “attentional void” phenomenon described herein.

Our research also opens up multiple avenues for future research. First, having introduced the concept of “attentional voids”, future research could aim to operationalize this construct and test for its presence (or, in actuality, its absence) in multiple, different, organizational research streams. The ABV has thus far been used in to explain a variety of organizational outcomes related to specific events, such as regulatory changes [88,89], rare crises [90], and climate change impacts [91], or with the focus on understanding how organizational architecture influences the distribution of attention to particular topics at the decision-making level [92]. Yet, these studies are inherently biased in their choice of phenomenon of interest; that is, we can only measure resource allocations which have occurred, not those which have not occurred. Attentional voids represent areas where organizations should be focusing attention, and yet, they are not. Constructing measures to capture these missed strategic choices presents an interesting avenue for future research.

Second, and contrary to prior suggestions [60], we found limited support for claims that some of the structural attributes of boards, for example gender diversity on the board, have positive effects on the board’s attention to sustainability issues. The reasons that these demographic variables appear to be correlated to improved sustainability practices warrant further attention. For example, if women have a stronger interest in sustainability [47] and demonstrate a greater sensitivity for environmental and social dimensions [93], why do we still find attentional voids around this topic at the board level? Might other variables, for example individual personality traits, such as openness and tolerance for diversity, further help in understanding decision-making processes at board level? Moving beyond demographic proxies to measure these relationships is important.

Lastly, we believe that a more nuanced exploration of the tensions and trade-offs in the literature at the board level is required. While several important studies have suggested that corporate sustainable practices have failed to accelerate in the last several decades due to the tensions inherent in the stakeholder/shareholder debate, which favors a more transactional or instrumental approach [79], our findings suggest that debates about sustainability tensions and trade-offs are not occurring at the board level. Similarly, we see very little evidence that boards are involved in environmental scanning at all, contrary to previous research in this domain [60]. These findings, therefore, suggest much more work is required to uncover the processes and dynamics around sustainability in the boardroom.

7. Conclusions

This paper was motivated by a desire to further understand corporate inaction with regard to sustainability matters and to help close the sustainability imperative and implementation gap. Specifically, we examined board engagement with sustainability topics across a variety of different boards and industries. We summarized and integrated findings from prior theoretical papers, as well as relevant research on how attention influences board’s decision-making and hence the strategic orientation of the firm. Our findings suggest that there is an attentional void with regard to sustainability matters at the board level, which could explain the gap observed. In our paper we have argued that the reasons for the lack of engagement could be two-fold: for companies and industries that consider sustainability as a salient issue, boards seem to take a rather complacent stand by entrusting the issue entirely to the TMT; for companies that do not consider sustainability to be particularly relevant to the business, boards appear to be blind to these external stimuli and similarly do not place sustainability issues on the agenda. As the research suggests, sustainability needs to become a strategic imperative for companies and their boards. The lack of attention towards this issue represents, perhaps, our greatest challenge.