This text is sponsored by Heidrick & Struggles.

Whereas as we speak the chief sustainability officer (CSO) appears indispensable, the function has solely been round for about 20 years. But what started as a specialty silo that served as an extension of communications, branding, philanthropy and/or environmental, well being and security has advanced into one thing integral inside the C-suite of many organizations.

In early integration, sustainability management roles had little to no interplay with the board, affect in company technique, impression on product innovation, partnership with audit nor any interplay with shareholders. These actions have been knowledgeable and formed by extra conventional C-suite executives.

At the moment, many CSOs have an essential govt place in speaking dangers and alternatives which might be most materials to an organization’s underlining enterprise mannequin. Usually, this implies overseeing the ESG course of, creating and embedding long-term sustainability methods in live performance with the working and useful executives, and presenting and recommending to the board. 

1. Many CSOs are exterior hires

Most board administrators have low ranges of sustainability data or expertise, and few have totally built-in sustainability into their enterprise methods, in response to a latest report by Heidrick & Struggles, INSEAD Company Governance Centre and Boston Consulting Group. This explains why many CSOs are being recruited from the surface: extra boards favor a CSO with intensive expertise already with ESG and sustainability portfolios.

JP Morgan, for instance, employed a former member of Britain’s Parliament as EMEA ESG & Inexperienced Financial system Funding Banking officer. The logistics actual property supplier Prologis in 2022 appointed the president of Schneider Electrical’s sustainability enterprise division as its CSO. And BASF’s senior vp in its sustainability working phase turned Volkswagen’s CSO in April. Within the U.S., Microsoft in December named the Nationwide Safety Council’s senior director for local weather and vitality as CSO. This hiring development illustrates that the dangers (authorized, reputational and the like) of getting the fallacious CSO are actually too nice, and extra firms are importing expertise to what’s now a powerful pool of skilled candidates. 

As CSOs have grow to be key advisers to C-suite executives, they more and more accomplice cross-functionally to speak and ship on the group’s sustainability commitments and, on the whole, cut back organizational complexity. This embeds sustainability within the firm’s technique, processes and the actions everybody takes every single day. 

For the CEO, CSOs clarify altering ESG-related laws and necessities and the regular transfer towards requiring corporations massive and small to reveal their sustainability objectives and achievements. They assist the chief govt handle stakeholders’ relationships and construct organizational capabilities. 

As for boards, the CSO more and more retains administrators apprised of latest world ESG-related guidelines and laws and the way the corporate is doing in attaining objectives. Some firms kind Sustainability Steering Committees led by C-Suite executives that personal reporting to the board. 

2.  CSOs are rising with company clout 

CSOs’ rising tasks and stature sign CEOs will advance them inside their organizations — ostensibly to different seen working roles. The share of CSOs holding an executive-level place, alongside board members such because the chief govt or chief monetary officer, rose to twenty-eight p.c in 2021, greater than tripling from 9 p.c in 2016, a survey of 1,640 firms throughout 62 international locations by PwC confirmed. About one-third of latest CSO appointees report back to the CEO. Having a CSO sit on the chief board or report on to the CEO or one other board member helps educate and upskill the chief workforce on evolving ESG points, the PwC survey concluded.

Exemplifying the rising significance of the CSO, world expertise chief Emerson two years in the past appointed then-president Mike Practice as its first CSO. Practice CEO Lal Karsanbhai mentioned that “our work is more and more targeted on serving to our clients navigate environmental and regulatory challenges. Practice has many years of expertise throughout industries and a deep private ardour for sustainability.” 

As their roles and tasks change, CSOs show broader attributes and competencies. Along with possessing a deep and enduring purpose-driven ardour for working within the sustainability area, they grasp technique and a imaginative and prescient for foreseeing the longer term — and execute to make it a actuality. In addition they have to be a decoder and translator to speak what’s achievable, aspirational and materials inside their enterprise.

One other key attribute is an uncanny capability to affect organizations with out the authority of a chief working officer or CEO. They have to possess each direct and oblique influencing kinds. Folks all through the group, together with throughout capabilities, in addition to board members, should recognize and profit from their counsel. 

3. CSOs should perceive stakeholder ESG views 

Activist traders proceed to mount strain towards firms they contend aren’t attaining ESG objectives. In 2021, for instance, shareholder activists have been profitable towards Shell for perceived ESG failures. Extra such shareholder-led campaigns are anticipated to prod firms to boost their efficiency and disclosures on ESG issues.  

Consequently, CSOs are more and more advising firms on tips on how to considerate make good on their ESG commitments to individuals and the planet.  

Of rising significance, CSOs determine methods to drive revenues and cut back bills via the corporate’s sustainable practices and applications. Netflix, for instance, has a internet zero emissions purpose and is attaining its targets by, amongst different issues, decarbonizing movie and TV manufacturing, its greatest emissions supply. It additionally interviews sustainability storytelling into its movies and sequence.  

The world of ESG-related guidelines, laws and necessities is altering so quick that firms massive and small profit immensely from a CSO who grasps the evolving sustainability necessities and finest practices and applies them. 

The big selection of tasks of the place clearly makes a high-quality CSO crucial to enterprise worth and success.