Chief Sustainability Officer, Stakeholder Green Engagement, and Corporate Green Innovation

Abstract

The continuing environmental destruction brought by industrial and economic expansion has increased the sensitivity of business ethics and regulatory rules. Against this background, increasing pressure from diverse stakeholders threatens firms to behave socially responsibly and follow sustainable development paths. To respond to these escalating pressures, firms must incorporate ecological concerns into their strategic corporate policies and implement sustainable green strategies. Green innovation has become a critical strategy for many firms to achieve high-quality growth, which generates or creates new designs, products, processes, and services to minimize environmental harm (e.g., reduce pollution emissions, promote clean energy, use harmless materials, etc.) and achieve sustainable development. A growing number of studies explore different aspects of green innovation, and one conclusion of this literature is that green innovation helps firms address the escalating ecological crisis and respond to pressures from multiple stakeholders (e.g., investors, customers, competitors, government regulatory agencies, non-governmental organizations, and communities). Moreover, adopting green innovation assists firms in developing internal capabilities, enhancing organizational reputation, and gaining competitive advantage. Notably, while existing research acknowledges green innovation’s indispensable moral and economic value for corporate survival and development, studies exploring how to achieve successful green innovation remain inconclusive. Thus, developing an understanding of how to achieve green innovation success is a theoretical issue worth exploring and a significant practical problem.

Previous research has identified the effective utilization of corporate governance mechanisms, particularly senior executives, as a crucial driver for achieving green innovation success. However, existing literature on top management teams (TMTs) and green innovation has primarily focused on chief executive officer (CEO) as a key figure in corporate governance and a key influencer of corporate green innovation strategy. Scant research has focused on the function of the chief sustainability officer (CSO) on corporate green innovation, leading to a gap in existing literature. The emergence of CSOs is a new phenomenon in contemporary corporate governance and symbolizes firms’ commitment to sustainable development. A CSO is explicitly nominated and appointed to formulate and manage corporate sustainable strategies. Previous studies have mainly explored the function of a CSO on corporate social (ir)responsibility and environmental performance without examining the CSO’s function on corporate green innovation and explaining intrinsic mechanisms of stakeholder green engagement underlying this relationship. In other words, existing research lacks a deep analysis of the impact of a firm having a CSO on green investor participation, supply chain partner green attention, and government green subsidies. Thus, existing literature renders the link between CSO presence and corporate green innovation a “black box,” making it challenging to understand comprehensively.

Driven by the research limitations mentioned above, this thesis integrates an attention-based view and stakeholder theory to develop an integrated research framework. This thesis includes the following four key research content: First, it explores the connotation of CSO presence and investigates the direct impact of CSO presence on corporate green innovation. Second, after explaining the connotation of stakeholder green engagement and comparing the connotations and mechanisms of green investor participation and supply chain partner green attention and government green subsidies, this thesis explores the mediating role of three essential types of stakeholder groups in the link between CSO presence and corporate green innovation. Third, the thesis examines the moderating role of two kinds of third-party evaluation, namely analyst attention and ESG ratings, on the link between CSO presence and stakeholder green engagement. Finally, this thesis constructed a moderated mediation model to analyze the extent to which third-party evaluation will affect the mediating effect of stakeholder green engagement in the link between CSO presence and corporate green innovation.

Using secondary longitudinal dataset of 5,268 Chinese publicly listed firms in A-share stock markets for 2006–2022, the thesis tests the 22 proposed hypotheses, of which 17 hypotheses were supported, three hypotheses were partially supported, and two hypotheses were not supported. The empirical analysis of 48,794 firm-year observations show that: First, CSO presence has a positive effect on corporate green innovation. Second, stakeholder green engagement (i.e., green investor participation, supply chain partner green attention, and government green subsidies) plays an essential mediating effect in the link between CSO presence and corporate green innovation. Third, evaluation by a third-party (i.e., analyst attention and ESG ratings) strengthens the positive effect of CSO presence on green investor participation and supply chain partner green attention. In contrast, analyst attention does not affect the link between CSO presence and government green subsidies, and ESG ratings strengthen the negative impact of CSO presence on government green subsidies. Fourth, the intermediary role of stakeholder green engagement is affected by third-party evaluations.

The research innovations of this thesis are in three aspects:

First, this thesis highlights CSO presence in promoting corporate green innovation, thereby complementing the research on antecedents of corporate sustainability strategic decision-making from a corporate governance perspective. It further reveals that the CSO, as a crucial corporate governance mechanism, plays a decisive role in shaping corporate attention allocation. This thesis expands the application of attention-based view into the field of sustainability and deepens the understanding of how attention is allocated in corporate decision-making. Prior research on the antecedents of green innovation has predominantly focused on external environmental factors, such as regulatory pressures and environmental policies, in driving corporate green innovation. Existing literature that examines the role of top management teams (TMTs) typically views the CEO as the central governance figure and primary driver of corporate green innovation strategies. However, this perspective oversimplifies the mechanisms influencing green innovation and overlooks the key role of the CSO. This thesis identifies the appointment of a CSO as a significant antecedent of corporate green innovation, a finding of critical importance. The results indicate that companies with a CSO outperform those without a CSO in green innovation, thereby enhancing the understanding of the drivers of corporate green innovation.

Second, this thesis elucidates the multidimensional mediating mechanisms through which green investor participation, supply chain partner green attention, and government green subsidies link CSO presence to corporate green innovation. By examining stakeholder green engagement from a differentiated perspective, this thesis sheds light on the “black box” underlying the relationship between CSO presence and corporate green innovation. Additionally, it refines stakeholder theory by providing an enriched explanation of the logical chain connecting “internal governance—external collaboration—green innovation”. The thesis introduces the concept of stakeholder green engagement and classifies it into two key categories. The first category, rooted in market logic, includes green investor participation and supply chain partner green attention. The second category, based on institutional logic, consists of government green subsidies. By clarifying the nature and essence of these different forms of stakeholder green engagement, this thesis reveals the varying effects and mechanisms through which these stakeholders influence the CSO—green innovation relationship. These findings contribute to the literature on stakeholder management in the sustainability domain and extend stakeholder theory in green innovation.

Third, this thesis identifies the boundary effects of analyst attention and ESG ratings on the mediating role of stakeholder green engagement, emphasizing the contingent influence of third-party evaluation as external signals. By constructing a moderated mediation model, this thesis demonstrates how stakeholder attention shift from passive reception to proactive configuration in driving corporate green innovation. Integrating the attention-based view with stakeholder theory, the thesis offers a novel perspective on their application in corporate sustainability strategy research. This thesis introduces the concept of third-party evaluation and categorizes it into two dimensions: analyst attention and ESG ratings. By examining their differential moderating effects on the relationship between CSO presence and stakeholder green engagement, this thesis further develops a moderated mediation model that explains how internal corporate governance and external third-party evaluation jointly influence external stakeholder engagement in green initiatives, ultimately driving corporate green innovation. These findings offer theoretical insights for scholars concerned with corporate governance, stakeholder management, and corporate sustainability, further enriching the research paradigms related to corporate green innovation.

Date of Award	15 Aug 2025
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Long WANG (Supervisor), Xu Jiang (External Supervisor) & Brian Keane BOYD (External Co-Supervisor)