May the real Chief Sustainability Officer rise?

Given the importance of sustainability in the conduct of today’s business and the adoption of ESG (environmental, social, and governance) principles aimed at encouraging organizations to consider the wider impact of their operations to all stakeholders, the role of Chief Sustainability Officers (CSO) has finally and fully emerged. With businesses realizing how vital sustainability is to their long-term success, the CSO’s job is primordially to integrate sustainable practices into the organization’s operations and strategy.

As currently practiced, the CSO is responsible for creating and implementing the company’s sustainability strategy. This entails figuring out how to increase social responsibility, lessen environmental effects, and maximize commercial value. To make sure sustainability is incorporated into every aspect of the organization, from marketing and employee engagement to supply chain management and product creation, the CSO works hand in hand with several departments and business units. Important duties include:

• Strategic Planning: Crafting and advancing long-term sustainability objectives and strategies that are in harmony with the company’s mission, values and business and organizational objectives;

• Policy Development: Establishing and enforcing policies that encourage sustainable behaviors within the organization by all stakeholders concerned and involved;

• Stakeholder Engagement: Interacting and communicating with stakeholders, such as employees, clients, investors, and regulatory bodies, to ensure openness, reliability, cooperation, and responsibility;

• Performance Monitoring: Setting up benchmarks and indicators to measure the success of sustainability initiatives and developing detailed reporting mechanisms to calibrate performance; and,

• Innovation and Advocacy: Advocating for the development and adoption of sustainable products and practices and supporting sustainability within industry, peers, and community networks.

Management scholars have outlined several qualifications for excellent CSOs — criteria by which to gauge whether these executives would be a perfect fit to advance sustainability initiatives in the value chain. Here are some qualities that I gathered as most relevant in the choice of a potential successful CSO. He or she must have a diverse skill set and extensive experience in various area such as, among others:

• Sustainability Knowledge: A thorough and deep understanding of environmental science and governance, climate change, renewable energy, and sustainable business practices, including familiarity with related regulations and standards.

• Strategic Thinking: This consists of expertise in developing and implementing long-term strategies that are in line with the company’s overarching business goals, requiring forward-thinking, out of the box initiatives and the ability to predict future scenarios and trends and potential roadblocks coming from various sources and phenomenon.

• Business Acumen: A solid understanding of business principles, practice, and operations, including finance, marketing, and supply chain management, which aids in integrating sustainability into the business framework effectively. One that is deeply immersed in the formulation and implementation of business strategies is most preferred.

• Leadership and Communication Skills: A demonstrated ability to manage cross-functional teams and communicate effectively with a variety of stakeholders, motivating and encouraging the adoption of sustainable practices.

• Analytical Skills: Proficiency in analyzing data and measuring performance to measure and track the impact of sustainability initiatives to all stakeholders and communities with the end goal of making well-informed decisions that are beneficial to the organization and its impact communities.

• Experience in Change Management: Adept and highly experienced in leading changes within the organization and cultivating a culture of inclusivity and transparency in all his/her dealings with all stakeholders in the boom-bust cycle of the business.

THE STRATEGIC PERCH
Indeed, the emergence of the CSO position signifies a growing worldwide dedication to ESG accountability. However, the impact of this role is also largely hinged on how the leadership views its role and function. In other words, the performance and success of a CSO is critically linked to their strategic placement within an organization.

Management experts suggest the ideal scenario is for the CSO to be part of the so-called C-Suite — sitting among the top echelons in the organization, most notably reporting directly to the CEO or the board of directors. This arrangement ensures that sustainability is a fundamental strategic objective, receiving the necessary backing and resources — the so-called imprimatur from “higher-ups.”

This is especially important as the CSO needs to collaborate closely with critical departments, including:

• Operations: Working together to adopt sustainable practices in manufacturing, logistics, and facility management.

• Finance: Aligning sustainability initiatives with financial objectives and ensuring appropriate budget allocation and investment in sustainable projects.

• Human Resources: Partnering to cultivate a culture of sustainability through employee engagement, training, and development programs.

• Marketing and Communications: Making sure sustainability efforts are effectively communicated to external stakeholders, enhancing the company’s reputation and brand value.

• Supply Chain Management: Working with procurement and supply chain teams to encourage sustainable sourcing and minimize the environmental footprint of the supply chain

Indeed, the CSO is pivotal in steering organizations towards a more sustainable future. With a deep understanding of sustainability, strategic vision, business operations, leadership, and change management, the CSO integrates sustainable practices across all business areas.

Placed appropriately within the organizational structure, the CSO can effectively advocate for sustainability, making it a core element of the company’s strategy and operations. As companies continue to tackle the challenges of the 21st century, the role of the CSO will be crucial in achieving long-term success and making a positive societal impact.

Interestingly, and especially in Asia, the CSO is lodged under the care of the communication departments, most often led by executives with communication experience and background.

A study by recruitment firm Russell Reynolds Associates found that 70% of sustainability leaders in Asia have backgrounds in communications, a higher percentage than in other areas, where these leaders usually come from more senior, strategic roles.

With just one in 10 sustainability leaders in Asia having experience in strategy or supply chain management, it has been argued in commentaries that these leaders in Asia are more likely to adopt the role of a “storyteller,” as highlighted in the study mentioned above. An additional analysis of listed companies in Asia shows that only 27% of CSOs in Malaysia and 17% in Singapore have both qualifications related to ESG and prior experience in the field. Although there is no official data available, there are reports of the sustainability role being managed by communication executives in the Philippines

While there are arguments in favor of having the CSO report to communications, there are also compelling reasons to advocate for a more strategic reporting line.

Some quarters have commented that companies that place CSO under the stewardship of a communication executive and/or under the communication department are often viewed as putting their image before their actions. As pointed out in research that shows corporate sustainability departments have their roots in communications, there are growing concerns that companies may be prioritizing marketing strategies over real sustainability actions.

Indeed, while effective communication is vital in promoting a company’s sustainability efforts, the CSO’s duties extend beyond crafting messages and informing the public about these initiatives. As it should be, true sustainability demands tangible actions that reduce environmental impact, enhance social responsibility, and uphold ethical governance.

Placing the CSO under communications might lead to the perception that the CSO prioritizes messaging and managing the company’s public image over actual change, potentially resulting in accusations of “greenwashing,” where the company’s sustainability claims do not reflect its actual practices, damaging the company’s reputation.

When communication departments typically report to marketing or public relations leaders, this arrangement limits the CSO’s influence on key strategic decisions. Arguably, sustainability must be integrated into the very essence of a business — operations, procurement, product development, and financial planning.

Placing the sustainability function under communications may also be seen as relegating the CSO to a secondary role, obstructing the CSO’s ability to drive systemic change and weave sustainability principles into every aspect of the business.

Some purists even argue that communication experts might not have the deep knowledge of environmental laws, managing resources, issues related to the supply chain’s sustainability, or methods for assessing the social effects of actions that the CSO role requires.

If the CSO is placed under the communications department, there could be a gap between what is said and what is done, which could reduce the trust in sustainability efforts. If the sustainability team is closely connected to the communications department, the company might be seen as more focused on creating a positive narrative about its ESG performance than on the actual work of improving its corporate behavior.

Evidently, there are cautionary examples of companies in Southeast Asia where the placement of the CSO has led to less than desirable outcomes. For instance, in 2018, a Thai energy company tried to rebrand itself as more eco-friendly, but the rebranding effort failed because the CSO reported to the public relations department, limiting their ability to influence the company’s core operations.

In a similar vein, some companies in Indonesia have faced criticism for putting the CSO under the umbrella of brand management, focusing more on marketing their sustainability efforts than on actual change, which slows down progress towards real environmental goals.

Management experts suggest that for effective leadership in sustainability, the CSO should ideally report to a senior executive with significant influence, such as the CEO, COO, or a dedicated Sustainability Committee.

This arrangement allows the CSO to:

• Integrate Sustainability with Business Strategy: When the CSO reports directly to a senior executive, sustainability becomes a key part of the overall business strategy. This ensures that sustainability initiatives are aligned with the company’s long-term business objectives and financial considerations, leading to a more comprehensive approach.

• Access Resources: Being under the direct supervision of a senior executive gives the CSO access to the necessary resources and budget to implement meaningful sustainability programs. This enables them to drive significant change across different departments within the company.

• Foster Collaboration: A top-tier reporting framework supports teamwork among the Chief Sustainability Officer and other crucial divisions such as operations, supply chain, finance, HR, and marketing. This ensures that the principles of sustainability are integrated deeply into the company’s essence.

Ultimately, a Chief Sustainability Officer who excels in their role must possess extensive knowledge of sustainability, a clear strategic outlook, business smarts, and robust leadership qualities. Through aligning sustainability with the company’s main strategy and operations, involving key stakeholders, and promoting innovative solutions, the CSO can guide the company towards a future that is both sustainable and economically successful. Holding a strategic position in the company’s structure and a dedication to ethical practices further boosts the CSO’s potential to make a meaningful impact.