Corporate Social Responsibility (CSR) is becoming increasingly important for businesses large and small. The role of the Chief Sustainability Officer has been expanding over the past decade, as companies have become more cognizant of their social responsibility. In order to ensure that an organization is upholding the highest standards of environmental, social, and governance (ESG) practices, many have appointed a Chief Sustainability Officer (CSO).
As Reuters reports based on a survey across over 1500 companies covering 62 countries, “The number of CSOs holding an executive level position, alongside board members such as the chief executive or chief financial officer, hit 28% in 2021, more than tripling from 9% in 2016.”
But when should your organization appoint a CSO?
What does a Chief Sustainability Officer do?
A CSO is responsible for leading the charge in this area, taking proactive steps to ensure that the organization is making the most of its resources while also reducing its environmental footprint.
The main job of a CSO is to develop, implement, and oversee strategies that will lead to greater beneficial environmental impact. This includes identifying and improving upon existing sustainable practices as well as introducing new ones that can be adopted by the organization. The CSO must also be knowledgeable about industry trends, regulations, and public opinion when it comes to sustainability initiatives so that they can make informed decisions.
Additionally, a successful CSO will have strong communication skills in order to effectively engage with stakeholders and the public on the company’s sustainability efforts. Having a dedicated sustainability position within an organization not only ensures that these initiatives are prioritized but also helps create an internal culture of shared responsibility which can further help to improve overall employee morale and engagement in addition to benefiting the environment.
According to a report from Fortune 500 companies, the number of Chief Sustainability Officers has increased dramatically since 2020. In 2021, we saw more CSOs recruited than in the previous three years combined. This is a reflection of how corporations are not only looking to reduce their environmental impacts, but also engage with and support issues of social justice.
What does this trend mean for businesses in 2023 and beyond?
The Rise in Women in CSO Roles
As sustainability has become more complex and multi-faceted in recent years, so have its practitioners — leading to an almost doubling in the number of women in CSO roles since 2018. Women now account for 54% of all CSOs — up from 28% just two years ago — indicating that companies are increasingly recognizing the value that female leaders bring to sustainability initiatives. Unfortunately, despite this progress towards gender balance, most CSOs remain overwhelmingly white — indicating that there is still much work to be done when it comes to addressing racial diversity within these roles.
Creating Change & Promoting Diversity
It’s clear that companies must take action if they are truly committed to creating a more sustainable world through their business practices. One way they can do this is by actively promoting diversity within their ranks and by hiring people from all backgrounds for their sustainability teams — particularly those who come from underrepresented populations like minorities or people with disabilities who often have unique perspectives on how best to tackle these issues.
Additionally, companies should ensure that they are providing adequate training for their existing sustainability staff so that everyone can be equipped with the necessary skill set needed for success within an increasingly complex field.
As Green Business Bureau highlights, sustainability training is different from the employee training of the past as it has additional hurdles to overcome. For example, when looking at safety training, it’s not hard to imagine the effects of poor safety practices. In hazardous industries, such as construction and manufacturing, employees have likely witnessed accidents and their consequences. However, for sustainability, the results of inaction are far more remote and intangible. Therefore, adequate training is absolutely crucial.
The Growing Role of CSOs and Sustainability Teams
There has been an increasing focus on sustainability initiatives in recent years, with organisations placing more emphasis on how they can make a positive difference in the world through their operations. As such, many companies are investing more resources into creating and maintaining robust sustainability teams that can help develop effective strategies for reducing their environmental impact.
There are significant benefits to such investments. A recent research on responsible leadership by Accenture on responsible leadership found that companies with high ratings for ESG performance enjoyed average operating margins 3.7 times higher than those of lower ESG performers. Shareholders also received higher annual total returns to shareholders, outpacing poorer ESG performers by 2.6 times.
Decentralised Responsibility & Leadership Structures
While there is much enthusiasm for CSR initiatives among many businesses today, there has also been a shift away from centralized responsibility structures towards decentralized ones — meaning that decision-making power has been spread out among multiple stakeholders rather than concentrated at the top levels of management. As such, this new structure may mean that CSOs and sustainability teams are not quite as close as they once were to the CEO. This does not necessarily mean that their influence is any less — just that it lies further down the organizational hierarchy than before.
In addition to this decentralized structure, there is also an increasing shift towards co-creation models where decisions are made collaboratively between multiple stakeholders instead of unilaterally by top executives. This means that even though responsibility may be spread out among different departments or individuals, everyone still needs to work together to ensure the effective implementation of CSR strategies and measures.
If we look at McKinsey & Company’s experience, they emphasize that it is important for companies to have a central sustainability team that coordinates their work on these topics. “Our experience suggests that companies don’t need large central teams to implement their sustainability agendas successfully. While we have seen many companies start their sustainability transformations by allocating more central resources to these issues, we have also seen that having a smaller central team and more dedicated resources in the business lines that execute the detailed planning and implementation of sustainability can be most effective,” McKinsey’s insiders share.
Why do organizations hire a CSO?
At Dynamis Group, we have spoken with various leaders in the market to determine why some organizations choose to appoint a CSO.
We found that three conditions often prompt organizations to appoint a CSO:
- Companies may need to adapt quickly and effectively to the constantly changing environment. To do this, they need someone who can help speed up the internal adoption of ESG practices. This is where having a strong leader like a CSO comes in handy – they are able to focus specifically on ESG initiatives and help make sure that every aspect of the business upholds high standards.
- Organisations may feel pressure from external stakeholders – such as investors or customers – to uphold current standards. Having someone like a CSO helps ensure that all expectations are met by providing strategies and tactics for meeting those expectations.
- If an organisation acknowledges that ESG risks are substantial enough to be strategic, then appointing a CSO makes sense due their ability to provide guidance about how best to manage those risks for long-term success.
It is clear that a Chief Sustainability Officer can play an important role in helping an organization adhere to the highest standards of environmental, social, and governance practices. A CSO can provide guidance about how best to manage these risks for long-term success so that you can meet expectations from all stakeholders. Ultimately, it is up to your organization’s leadership team whether or not you should appoint a CSO – but understanding why others have done so is key in making your decision.
Dynamis Group is a high-value talent consultancy serving some of the most Caring Leaders in the world, helping them fulfill their mission by attracting Exceptionally Gifted Talent. We consistently explore new ways of bringing innovation to our clients in order to become a catalyst for a positive impact in the world, and we design solutions that correspond directly to the ambitions and direction of our partners.
Contact us to learn how we can accelerate your Talent Search (and find exactly the Chief Sustainability Officer you are looking for), and attract Exceptionally Gifted Talent.
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