Sustainability roles are still new to the business world. Only 27.2% of S&P 500 companies had a chief sustainability officer in 2022—up from only 19.1% in 2017 and earlier, BoardEx reports. But sustainability roles are growing increasingly important at board and leadership levels. Business leaders must determine how moves towards sustainability will impact shape all aspects of their organizations as a result.
This article features insights shared during a recent BoardEx panel of sustainability experts. It explores how companies are working towards defining sustainability in terms of talent, strategy, and operational excellence. As we will find, the evolution of sustainability roles aligns closely with broader transformation of business models to improve long-term performance.
- David Callaway, Founder and Editor-in-Chief of the ESG-focused financial newsletter Callaway Climate Insights, as moderator
- Jennifer Skylakos, Managing Partner and Global Head of the Sustainable Infrastructure and Energy Funds practice group at DHR Global
- Paula Luff, Director of ESG Research and Engagement at DSC Meridian Capital
- Heidi DuBois, Global Head of ESG at AEA Investors
Sustainability leadership is still coming into focus
Organizations across industries must contend with a growing fixation on sustainability among external stakeholders. These parties include regulators and shareholders who hold companies accountable; but also, a growing number of consumers who prioritize these issues.
“Larger companies have had a huge leap in disclosure over the past several years because the regulatory environment is changing,” says Luff. “But disclosure is not the endpoint—it’s a tool for strategy, not the goal.”
Indeed, sustainability goals must include competitive factors such as operational improvements, resilience, relevance, and viability. “There is an operational excellence component of ESG,” says Dubois.
Business leaders are shaping the CSO role based on these strategic goals instead. But applying sustainable best practices and successful reporting are not a forgone conclusions for the world’s leading organizations.
Determining the CSO’s responsibilities
One key issue is a lack of set of standards that make the CSO role workable. “Often if you drill down, a person in a sustainability role doesn’t fully know why it’s in their title,” says Skylakos. “Greenwashing” roles using arbitrary sustainability titles won’t suffice. Instead, “understanding where you are in your sustainability journey determines what roles you need.”
For example, business leaders find value in defining the CSO as a strategic role. “You have to understand what the objectives of the business are for the next three to five years and meld your ESG priorities with those business priorities,” says Dubois. As a strategic leader, CSOs can have more influence over internal stakeholders and high-level decisions.
Increasingly, defining the CSO role is beginning at the board level as a result. “We’re definitely seeing much more board involvement and oversight,” says Luff. Meanwhile, a subcommittee of senior managers will interface with CSOs for day-to-day activities. Operationalizing the CSO role requires boots on the ground.
Hiring the right sustainability talent
Many companies are hiring CSOs from other internal departments with this in mind. BoardEx data shows 79% of existing S&P 500 CSOs were appointed from within their companies. CSO backgrounds include sustainability (25.8%); but also, legal, corporate affairs and communication (25.8%); operations and strategy (11.3%); and both procurement and HR (11.3%), BoardEx reports. Other backgrounds include technology, engineering, and finance.
Inside experience may help new CSOs build internal teams that will drive strategic planning, development, execution, and reporting successfully. These CSOs and their teams may better understand their companies and what it needs to achieve more broadly; this perspective can help CSOs determine the best path forward on their sustainability journey.
Recruitment strategies need to evolve
Companies will still need outside talent for sustainability roles. Although only 20.6% of CSOs at today’s S&P 500 companies began as external candidates, 66.7% did have a background in sustainability—something companies may not have been able to find acquire in house.
Companies need to become more creative and inclusive in terms of how and whom they recruit. Today, 85% of CSOs at S&P 500 companies are in their 50s or older. “Companies need to be prepared to hire Gen Z and younger millennial talent,” says Luff. Youthful candidates may be more sustainability-focused, incentivized to put sustainability at the forefront, and more open-minded about operational solutions. “But if you don’t have an authentic understanding of ESG issues, a true purpose, and a commitment to real efforts, you won’t succeed.”
Recruiters should emphasize commitment, longevity, and incentives when engaging candidates.
Recruiters also must be upfront about what sustainability leaders “own,” what they are accountable for, and how they will partner with the rest of the organization, adds Dubois. Below-C-level candidates will seek a path to higher pay or more senior positions in the long term. “You can put somebody in at a reasonable price point at a vice-president level.” says Skylakos. “But if you want the right people, you will have to offer more than you might have originally thought.”
Everyone must play a role
In time, sustainability will be as fundamental as supply and demand. “If we make progress toward Net Zero and governments pursue it successfully, the economy will change,” says Dubois. “That means businesses must be prepared to adopt truly sustainable models.”
The core challenge then is adopting the skills and capacities that enable truly sustainable operations. This includes understanding the complexity of sustainability, driving sustainability conversations cross-functionally, and developing sustainability strategies employees and partners will universally adopt.
“For that, you need to have every level of the company—from the board down to product development—involved,” says Dubois. “Be ready, because there will be a much broader demand for ESG expertise coming in the near future.”
If you are looking to expand your sustainability talent pipeline let us know. See BoardEx in action and connect with a member of the team and begin exploring today.