The Strategic Role of Chief Financial Officers in the Transition to Circular Business Models : Striking a Balance between Strategic Leadership and Financial Performance

Abstract

The following study investigates which sociodemographic characteristics of CFOs are beneficial for the transition to circular business models in their companies. The theoretical base for this study is Upper Echelons Theory which focuses on how top management orientations and values influence the strategic choices in firms. A multi methods approach was chosen (qualitative and quantitative) to empirically validate the hypotheses on sociodemographic characteristics. First, data was collected from 97 CFOs from companies supporting a transition to a circular economy. In the second study, qualitative data from expert interviews is used to validate the empirical results and to identify other important influencing factors not previously considered. The study concludes that younger CFOs are positively related to the transition to a circular business model, as are CFOs with lower levels of formal education (bachelor's degrees). This implies for older CFOs that they may subconsciously stand in the way of a transition and that they should therefore become aware of this to avoid it. The expert interviews give reason to believe that it is rather the CFOs' willingness to learn in this specific area that is decisive and that in the future formal education in sustainability matters can be of increased importance. Consequently, it is crucial for CFOs to continue to learn and educate themselves around sustainability and specifically circular economy in order to be aware of the identified benefits but also hurdles of such a transition presented in this paper and to benefit and handle them more easily. CFO tenure yields different relationships in the quantitative (positive one) and qualitative (negative one) parts of the study. Apart from that, the results from the qualitative study suggest that unobservable psychological characteristics of CFOs have a positive influence on the transition to circular business models. These should also be investigated further in the future.