3 ways CSOs have evolved into key advisors to businesses -

3 ways CSOs have evolved into key advisors to businesses

This article is sponsored by Heidrick & Struggles.

While today the Chief Sustainability Officer (CSO) seems indispensable, the role has only been around for about two decades. However, what started as a niche silo that served as an extension of communications, branding, philanthropy and/or EHS has evolved into something integral within the C-block of many organisations.

In the early consolidation, sustainability leadership roles had little or no interaction with the board of directors, influence corporate strategy, influence product innovation, partner with audit or any interaction with shareholders. These activities were informed and shaped by the more traditional C-suite executives.

Today, many CSOs have an important executive position in communicating the risks and opportunities most critical to the company’s core business model. Often, this means overseeing the ESG process, developing and integrating long-term sustainability strategies in coordination with CEOs and executives, and making recommendations to the board.

1. Many CSOs are outside employees

Most board members have low levels of sustainability knowledge or experience, and few have fully integrated sustainability into their business strategies, according to a recent report by Heidrick & Struggles, the INSEAD Center for Corporate Governance, and the Boston Consulting Group. This explains why many CSOs are recruited from abroad: more boards prefer CSOs that already have extensive experience with ESG and sustainability portfolios.

For example, JP Morgan has appointed a former member of the British Parliament as ESG Officer for EMEA and Investment Banking Officer for the Green Economy. Logistics real estate provider Prologis appointed in 2022 Head of Sustainability Business at Schneider Electric as its Civil Society Officer. He became BASF’s Senior Vice President in Volkswagen’s Sustainable Operations segment in April. In the United States, Microsoft in December appointed the National Security Council’s senior director for climate and energy to the position of civil society organization. This hiring trend shows that the risks (legal, reputational, and the like) of having the wrong CSOs are now very high, and more companies are importing talent for what is now a solid pool of experienced candidates.

As CSOs become key advisors to C-suite executives, they are increasingly involved in the multiple functions of communicating and delivering on an organization’s sustainability commitments, and overall reducing organizational complexity. This embeds sustainability into the company’s strategy, operations, and the actions everyone takes every day.

For the CEO, CSOs explain the changing regulations and requirements related to ESG and the ongoing move toward requiring companies large and small to disclose their goals and sustainability achievements. They help the CEO manage stakeholder relationships and build organizational capabilities.

As for boards of directors, CSOs are increasingly keeping directors informed about new global ESG rules and regulations and how the company is going to achieve goals. Some companies form sustainability steering committees that are led by C-Suite executives who report to the board of directors.

2. CSOs grow with corporate influence

The increasing responsibilities and stature of CSOs mean that CEOs will work to develop them within their organizations – ostensibly to other visible operational roles. A survey by PricewaterhouseCoopers showed that the percentage of CSOs holding executive positions, along with board members such as CEO or CFO, rose to 28 percent in 2021, more than three times from 9 percent in 2016. About a third of recently appointed CSOs report to the CEO. The PricewaterhouseCoopers survey found that having a CSO on the Executive Board or reporting directly to the CEO or another member of the Board helps educate and upskill the executive team on evolving ESG issues.

Reflecting the growing importance of CSOs, global technology leader Emerson two years ago hired then-President Mike Train as its first CSO. Train CEO Lal Karsanbhai said: “Our work is increasingly focused on helping our customers overcome environmental and regulatory challenges. Train has decades of experience across industries and a deep personal passion for sustainability.”

As their roles and responsibilities change, CSOs exhibit broader traits and competencies. In addition to having a deep, enduring, goal-driven passion for work in the field of sustainability, they internalize the strategy and vision to predict the future – and implement it to make it a reality. They must also be decoders and interpreters of communicating what is achievable and what is ambitious and material in their work.

The other key characteristic is the uncanny ability to influence organizations without the authority of a COO or CEO. They must possess both direct and indirect methods of influence. People throughout the organization, including across functions, as well as board members, should value and benefit from their attorneys.

3. CSOs should understand the views of stakeholders on ESG

Activist investors continue to put pressure on companies they claim are not meeting ESG targets. In 2021, for example, shareholder activists successfully confronted Shell for its perceived ESG failings. More of these shareholder-led campaigns are expected to prompt companies to improve their performance and disclosure on ESG issues.

As a result, civil society organizations are increasingly advising companies on how to implement their ESG commitments thoughtfully towards people and planet.

Increasingly important CSOs identify ways to increase revenue and reduce expenses through sustainable company practices and programs. Netflix, for example, has a goal of net zero emissions and achieves its goals by, among other things, decarbonising film and television production, which is the largest source of emissions. She also interviews stories of sustainability in her films and series.

The world of ESG rules, regulations and requirements is changing so quickly that businesses large and small benefit greatly from civil society organizations that recognize and apply evolving sustainability requirements and best practices.

It is clear that the wide range of responsibilities of the position makes having a high quality CSO essential to the value and success of the business.