With COP27 and COP15 raising the bar, and now 2023 is upon us, there’s no better time to think beyond compliance towards transformation.
More companies are appointing Chief Sustainability Officers (CSOs). The role is becoming more important as more firms realise climate and nature are at the heart of their ambitions to run responsible business operations. But how can organisations make the most of having a CSO, and protect themselves against allegations of greenwashing?
- Don’t treat it as tokenism – the CSO needs to be a C-suite appointment
A PwC study has shown that companies appointed as many CSOs in 2020/21 as in the previous eight years combined. But it also found less than a third of all CSOs hold C-suite positions. Another report by the Weinreb Group, the executive search company, found that only 21% of CSOs in the US reported being one step away from the CEO, a decline over the past decade.
This risks companies being accused of creating token appointments and can trigger allegations of greenwashing. But it also limits the board’s ability to strategically respond to environmental, social and governance (ESG) issues. According to an RSK survey of 100 C-level executives at UK companies with 500+ employees and £500m+ annual turnover, just 7% of boards discuss climate risks at every board meeting, so a CSO at board level can provide vital input as and when issues arise.
- Develop wider knowledge of ESG issues across the board, don’t just leave it all to the CSO
As climate risks increasingly drive business strategies, there’s a growing need for dedicated oversight in corporate boardrooms. There are wider gains too: having a CSO sit on the executive board can help educate and upskill the entire executive team on evolving ESG issues. Just as everyone on the board should have financial management and budgetary expertise, even though there’s a CFO, every board member should also be across the ESG issues relating to their department.
- Make sure the appointment has the appropriate skillset
The PwC survey found that only around one in five CSOs came to the role with a professional business and sustainability background. This needs to increase – or development training put in place – to ensure the role has the right skillset to drive change.
Sustainability now reflects labour, business ethics, environment, health and safety and other areas: it’s much broader than just environmental protection. Pre-2000, it focused on energy saving. In the early 2000s, people started to concentrate on carbon mapping and understanding the supply chain. And over the past few years, it’s expanded to look more at international verification of sustainability standards and science-based targets.
It won’t wash to appoint someone with limited experience in one area. And as well as technical ability, the right person needs to demonstrate their skill in problem solving, leadership, inspiring people and integrity – just as any other boardroom appointment.
- Reassure your investors and stakeholders
Integrating CSOs into the C-suite can reassure investors: according to one study two-thirds of investors say this would make them more confident that a company can manage its ESG risks.
The COP26 and COP27 climate summits raised awareness among investors and the public of what companies are doing to reduce carbon emissions. The COP15 biodiversity summit has now drawn equal attention to what businesses are doing to address their impact on the natural world.
At COP15, a target was agreed that will require companies and financial institutions to regularly monitor, assess, and transparently disclose their risks, dependencies and impacts on biodiversity. This is new territory for most companies and will need urgent and transformative action – and investors will be watching.
- Ensure the whole organisation buys in
Appointing a CSO at C-suite level sends an important message across the organisation that sustainability is as crucial as finance or human resources. But appointing someone to lead on ESG issues is one thing; ensuring everyone has a stake in these issues and understands their role in addressing them is another.
As Michael Froman, Mastercard’s vice chairman, said: “Ultimately, ESG only works if it is fully embedded and integrated across the corporation. Sustainability is too important to leave to our chief sustainability officer. It needs to be owned by everybody.”
As other commentators have highlighted, too many organisations are still stuck in an out-of-date philosophy, believing ESG to merely mean compliance, altruism, or corporate responsibility. They may have recruited a CSO but haven’t yet rallied their troops. Metrics like equity and inclusion may be on their scorecard but they haven’t built equity and inclusion into their everyday culture. They publish disclosures but haven’t developed a distinctive story to share. The ESG agenda may be used to guide donations but it’s not being used to guide the company’s biggest strategic decisions.
The organisations that will lead in this context go beyond a basic, box-checking approach and pursue an authentic commitment to environmental and social impact that is driven by a deep sense of purpose, embodied within the organisation and woven into the business.
If this mindset runs through the entire company, then the CSO’s role will be more about transformation than compliance. It will lead to a mindset where the rest of the business don’t wait to be challenged, but will ask their CSO what to do because they ‘get’ the whole sustainability issue.
Perhaps the greatest indicator of success will be if the CSO role eventually becomes redundant because doing things the sustainable way is just the way that things are done.
