The evolving role of a Chief Sustainability Officer

You have been working in sustainability for a few years now. You have built up expertise in ESG scoring and reporting, and you have some good subject matter knowledge in your chosen field. You now feel it's time to step up. That you are ready for a Chief Sustainability Officer role - partly because you have started to understand that that is where you will get a real chance to 'make a difference'.

And then you get the call from the reputable sustainability recruitment company. What should be your first question? Is it who is the employer, as you only want to work where you can really make a difference? Is it the salary? Or maybe it's about flexible working?

All good questions, but maybe the first question you should ask the recruitment person is 'who will I report to?'

This blog was previously published as a Thought Leadership piece for Farrell Associates.

We are big fans of the work of Alison Taylor, who is now an Associate Professor at NYU Stern School of Business. She is also the author of an upcoming book entitled Higher Ground, which comes out in February next year (and that we are very much looking forward to reading).

One area where Alison is focused is on the changing role of the Chief Sustainability Officer.

In a recent article for HBR, she (with Robert Eccles) pointed out that historically CSOs have acted like stealth PR executives, telling appealing stories to the company's many stakeholders. This has made the CSO responsible for everything, but with limited power to actually deliver. Or to quote Alison "they currently have a lack of role clarity, and insufficient power and resources. With a wide range of reporting lines".

There is an excellent video presentation that Alison made to the NYU School of Professional Studies Center for Global Affairs that is really worth watching/listening to:

The good news is that this situation is now changing. "Some CSOs are now spearheading the true integration of material Environmental, Social, and Governance issues into corporate strategy". And by corporate strategy we mean all of the decisions the organisation needs to make about where it invests its capital (both financial and intangible). And remember, strategy is as much about the art of choosing what NOT to do, so not everything can be material.

And where is this happening to the greatest extent? In those sectors where the companies are facing the greatest existential threats. This should not be a surprise - material risks create the requirement for innovation.

If these changes are to become more widespread and entrenched, CSOs will not only need to learn new skills, but they need to give some serious thought to where they sit in the corporate organisation, or putting it more simply - who will they report to?

CEO + CFO + CSO = the next generation of investor conversations. This is not to say that the only thing that matters is investors. It just reflects the reality that if you are not 'at the table' with investors, CSO will never be strategic. And they will never get the resources they need. - Alison Taylor 2023

This makes it clear why who you report to really matters? I have seen this in my own career. I used to be an engineer. I loved the challenge of building things and problem solving, often with limited resources. But, like many engineers I changed careers. I moved into finance. Why? It's simple. Finance people get to decide priorities. They select where their organisation invests and they play a large, if not dominant, role in setting strategy.

So, Alison argues that to connect the core organisational strategy to sustainability, and to fully align capital allocation actions, CSOs need to be part of that top table, what in the US is called the C suite. Which comes back to who do you report to!

Now, you might think, ah yes, but this is a US debate. It's different in Europe, and even more different in Asia. Well not really.

The team at Imperial College Business School in London have recently published a report entitled 'How the Role of the Chief Sustainability Officer Is Evolving to Shape Business Strategies'. They also highlighted that the role was changing from a 'specialised communication role', to one that is increasingly in a position to shape business strategy.

The report had a really telling section - Hierarchy Matters. Here they draw attention to the fact that the title is less important than where the person sits in the organisation.

The transformational power of the position is also linked to where it falls in a company’s hierarchy. Although there is no guarantee of a successful integration of sustainability initiatives into business strategy, in our sample a CSO’s access to top leadership correlates with their influence at the highest level. A good half of the CSOs in our sample report to the CEO or to the executive board directly.

Clearly, this new role is going to require new skills and expertise. While two out of three of the CSOs interviewed in the Imperial College study came from a business/economics and engineering background, this does not mean that they necessarily have a detailed background in finance. And finance is what most strategy and investing people speak. The good news is that these are skills that can be learnt.

And as Alison points out, the CSO doesn't have to be the sole subject matter expert. They can work with finance specialists, in much the same way that they also talk frequently with operational, risk and compliance/reporting teams. And as with all of these interactions, it's about learning a new language. As a group they will not be motivated by the same things as you, so you need to find common ground.

So, lets go back to that call from the reputable sustainability recruitment company. Sure, you need to ask about who the company is, and what the salary would be. But probably the most important question you need to ask, the one that will determine how much difference you really will make, is who would I report to?

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