Hong Kong University of Science and Technology (Guangzhou), China
Two key mechanisms of sustainability governance—the sustainability committee at the board level and the chief sustainability officer (CSO) at the executive level—have often been criticized as symbolic arrangements within firms. However, in light of goal theory, we argue that the CSO is more likely to create substantive value for a firm’s ESG performance than the sustainability committee. Specifically, members of the sustainability committee often experience a high level of goal conflict when trying to balance the firm’s financial and social performances, which can reduce their willingness to commit to substantive ESG initiatives. In contrast, the CSO’s career goals are better aligned with those of the firm in the ESG domain. Furthermore, these relationships are contingent upon the origin of the CSO and the degree of overlap in membership between the sustainability committee and other committees of the board. Our analysis of a sample of the U.S. publicly listed firms in the S&P 500 index from 2003 to 2015 supports our key predictions.
