Leading Organisational Sustainability: The Impact of CEO Optimism on Organisational Decarbonisation

Krishnendu Saha and Bijoy Chandra Das

No 37, CAFE Working Papers from Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University

Abstract: This study investigates the relationship between CEO optimism and firm-level decarbonisation performance using a longitudinal dataset of 1,600 publicly listed U.S. firms from 2010 to 2020. Drawing on Upper Echelons Theory (UET) and behavioural strategy, we examine how executive disposition shapes environmental outcomes across three key indicators: absolute greenhouse gas (GHG) emissions, emissions intensity, and emissions disaggregated by scope (Scopes 1, 2, and 3). CEO optimism is operationalised through stock option-based measures of forward-looking executive behaviour. Our empirical analysis, employing fixed effects and instrumental variable estimations, reveals that optimistic CEOs are significantly associated with lower absolute emissions and improved emissions efficiency. The effect is most substantial for Scope 1 and Scope 2 emissions, areas under direct managerial control, while Scope 3 reductions exhibit weaker associations, indicating the limits of individual leadership traits in addressing complex, value chain-wide challenges. We argue that CEO optimism functions as a behavioural enabler of decarbonisation, facilitating long-term strategic investment and adaptive risk-taking. However, optimism also carries potential drawbacks, including miscalibrated ambition and overextension. The findings contribute to emerging scholarship on executive cognition and corporate climate action, offering theoretical and practical insights into how psychological traits influence organisational sustainability trajectories.

Date: 2025-07-31
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