In recent years, the role of the Chief Sustainability Officer (CSO) has transitioned from the corporate side lines to the epicentre of business strategy.
While once, sustainability leaders were referred to as ‘stealth PR executives’, Robert Eccles and Alison Taylor wrote in a recent Harvard Business Review piece – the CSO role has evolved into one that is “finally becoming strategic” as the focus moves from “feel-good corporate social responsibility to hard-nosed sustainable value creation”.
More than mere organisational change, it is a transition that highlights the increasing significance of sustainability in business beyond regulation and compliance.
As Amy Brachio, EY’s Global Vice Chair of Sustainability explains in the 2023 EY Sustainable Value Study – “CSOs are being tasked with identifying the sustainability issues that have a significant impact on an organisation’s financial performance and risk profile”.
But even CSOs in the most sustainably committed organisations are struggling – given the slow pace of progress on climate action and lack of cross-function collaboration.
And this is driving concerning levels of CSO dissatisfaction.
EY data reveals only 17% of CSOs (and equivalents) are “highly satisfied” in their roles and 42% not say they aren’t committed to staying with their current employer.
Challenges CSOs face today
As global economic and geopolitical headwinds gain momentum, company progress on climate action is ebbing – CSOs are receiving less spend and on top of that are being pressured by C-suite peers for short-term actions and results.
EY’s study, which surveyed 520 CSOs and corporate responsibility leaders at companies with over US$1 billion in revenue across 10 industries and 23 countries, reports an average decline in GHG of 20%, down from 30% in a study last year, along with a decrease in the average number of actions organisations are taking relating to climate change to 4, from a prior average of 10.
And looking to 2024, just 34% say their organisation plans to increase spending to address climate change in the year ahead, compared to 61% last year.
“Amidst the backdrop of unprecedented geopolitical tensions, sustainability leaders are facing clear challenges with resource allocation,” says Brachio.
Their jobs are made even more challenging given that nearly half (46%) say they don’t have the authority to hold their C-suite counterparts to account for their performance on sustainability initiatives.
Which is where the ‘transformational’ CSO comes in.
Identified by EY as agents of change, the ‘transformational CSO’ is more likely to turn climate commitments into action.
While just one in five organisations employ a transformational CSO, those who do have initiated or completed 1.4X more climate actions on average than those without, finds EY.
Companies with transformational CSOs are also more committed to climate impact reductions, with half set to spend more next year, and drive higher emissions reductions. And a transformational CSO is more satisfied and less likely to consider leaving their role.
Rise of the ‘transformational’ CSO
So what makes a CSO 'transformational"?
EY research points to both the background of the person chosen to lead an organisation’s sustainability agenda and how they are brought into the role as influential in their ability to have a meaningful impact.
Described by EY as a leader who can “influence, negotiate, broker, and listen”, the ‘transformational CSO’ has both operational background and the influence to drive business strategy and implementation.
Put simply, transformational CSOs are experienced in leading change at scale – and play a “significant role in setting company strategy and actively engaging with shareholders, investors, and customers”, according to Pilar Cruz, Cargill’s Corporate CSO.
It’s a pivotal change to the traditional CSO role that demands professionals have a deeper background in commercial, operations, finance, and business transformation.
As Dr Lutz Hegemann, the President or Global Health & Sustainability at Novartis, puts it: “You need to have someone who has a very thorough business understanding” because “you don’t want a sustainability strategy and a business strategy – you want a sustainable business strategy”.
It’s not just about a CSO having the necessary background – but the way in which are they are empowered by the C-suite to drive the strategy.
As sustainability leaders play an “increasingly strategic role” in navigating both the internal and external challenges of moving from climate ambition to climate action, Brachio says it is essential they are “not only empowered to drive sustainability initiatives but also have the operational mandate to integrate their plans into a wider business strategy.”
These ‘transformational CSOs’ have more resources at their disposal, such as a dedicated budget and team, and exert greater influence internally.
So, what actions should they take to facilitate CSOs as agents of change – as transformational?
- Select (or develop) a CSO with a deep understanding of the business model. Empower them so their imperatives are understood as being core to business value
- Give CSOs a strategic seat at the table (i.e., reporting to the CEO and access to the board) and the ability to drive accountability for sustainability initiatives across the entire business
- Strengthen internal collaboration by creating governance structures that drive cross-functional teaming collaboration, such as business-level sustainability councils chaired by the CSO
- Empower the CSO to help set sustainability strategy and goals; build the capacity of the sustainability function to collaborate with the business on executing the strategy
- Have the CSO take point to ensure that the organiSation understands and is prepared to meet emerging policy changes and new reporting obligations across the domains where the organiSation operates.
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