Does the CEO's Attention Affect How Well the Firm Performs Environmentally?

Abstract

This study explores whether CEOs' environmental attention (CEA) enhances firms' environmental performance. Drawing on attention-based and upper echelons theories, which emphasize that executives' cognitive focus shapes organizational outcomes, we argue that CEOs who devote greater attention to environmental issues are more likely to integrate environmental activities into corporate strategy. Using a panel dataset of non-financial firms listed in the FTSE 100, we measure CEOs' environmental attention from their annual letters to shareholders, employing four validated environmental wordlists. The results show that higher CEO environmental attention is positively associated with improved environmental performance, both concurrently and prospectively, with the strongest effect observed in emissions reduction. These findings highlight the pivotal cognitive role of CEOs in advancing corporate environmental sustainability and contribute to the growing literature on leadership and sustainability governance.