The Influence of Corporate Sustainability Officers on Performance

Abstract

The creation of a specialized executive position that oversees sustainability activities represents a distinct shift in the structure of top management teams and their approach for addressing sustainability concerns. However, little is known about these management team members, namely the corporate sustainability officers or CSOs. We examine CSO appointments and their association with subsequent sustainability performance. Our results indicate that the creation of a CSO position may represent more of a symbolic versus substantive governance mechanism. Further tests suggest that CSO expertise and the firm’s existing sustainability performance affect the association between the CSO and post-appointment sustainability performance. We find no association between CSO appointments and subsequent sustainability performance for firms that were already poor performers, while firms possessing relatively higher levels of prior sustainability performance appointing a CSO begin to experience significant improvements to performance after three years. We further find that CSOs with prior sustainability expertise are associated with increases in sustainability performance in firms that were already strong performers, but not in firms with poor sustainability performance. Non-expert CSOs on the other hand, are associated with initial decreases in performance for poor performing firms, whereas better performing firms hiring non-expert CSOs are able to rely on other sustainability attributes of the firm and benefit from improvements in performance in the long-term. We discuss the potential importance of these positions as it relates to symbolic vs. substantive governance mechanisms through the lens of top management team literature streams.

Keywords: Chief Sustainability Officer; CSO; sustainability performance; CSO expertise