The rise of the Chief Sustainability Officer

Publication
June 03, 2024

As businesses face growing demands for climate action and accountability on Environmental, Social and Governance (ESG) issues, sustainability is high on the corporate agenda. Yet, integrating sustainability across all aspects of an organisation remains a complex challenge. Enter the Chief Sustainability Officer (CSO).

This surge in awareness has led to the increasing appointment of CSOs globally, with more hired in 2021 alone than the previous five years combined. However, the introduction of this role has also brought with it uncertainties about the scope of the CSO’s authority and influence within organisations.

So, what is the role of the CSO?

The role of the CSO is to oversee an organisation’s sustainability strategy and related initiatives, including strategic planning, goal setting, regulatory compliance, internal policy, implementation of sustainability programmes, performance tracking, stakeholder engagement, sustainability reporting, ESG risk management and more. This very broad role has however led to the fragmentation of responsibilities, often leading to environmental matters addressed by the Chief Operations Officer (COO), social matters managed by the Chief Human Resources Officer (CHRO), and governance responsibilities overseen by legal, compliance or other departments.

This often leads to a lack of clarity and communication between various departments, hindering the formulation of comprehensive and forward-thinking ESG strategies. CSOs can be categorised based on their relationship with the CEO and their level of influence. Whereas some CSOs have the seniority and mandate to drive comprehensive ESG transformation, others may have less influence on large-scale sustainability initiatives and may be tasked with one specific area, such as data collection or reporting compliance.

The five archetypes

In light of the diverse role of the CSO, different archetypes have emerged, each with different focuses and approaches:

When CEOs take direct responsibility for ESG and become the de facto CSO, they aim for a profound transformation of the business, placing sustainability at the core of the company’s purpose and focusing on long-term, sustainable performance. These CEOs believe only they can drive the necessary change and balance the demands of various stakeholders, including customers, investors, employees, and NGOs.

In this scenario, the CSO reports directly to the CEO and is a member of the top management team, similar to roles like COO or CFO. This position allows the CSO to present sustainable strategies to the management board and ensure that sustainability is considered alongside other corporate goals. Sometimes, an existing C-suite member might take on the CSO role in addition to their duties. However, this "add-on" role may be seen as just a label if it doesn’t involve substantial changes to tasks and actions.

This is the most common type of CSO. The influence of this role may be more limited as they would usually lead a team of experts across E, S, and G topics, but depend on the cooperation of business units and support functions to implement ESG strategy and collect ESG data. They spend significant time educating business units about ESG and gaining their support for sustainability plans and projects. The mandate of this CSO varies, often extending beyond compliance to include developing ESG initiatives, creating steering KPIs, and managing ESG reporting.

Another lighter CSO type may be located within a core business function, typically the one that most impacts the company’s ESG footprint. This CSO focuses on transforming business activities to minimise environmental or social harm. Embedding a CSO in a core business unit can lead to quick, tangible impacts. This approach is pragmatic, as the CSO works with expert teams on the ground, increasing the likelihood of success.

This last archetype represents the CSO that is part of a support function like finance, compliance, HR, or marketing and communications. They usually have the most limited mandate, being far removed from the areas with the greatest influence on the company’s environmental footprint and social impact. Their ability to introduce cultural or operational change may be restricted. Companies with this type of CSO are typically new to ESG, focusing mainly on minimising legal, safety, and reputational risks, meeting regulatory obligations, or signalling their commitment to ESG.

Maximising the impact of CSOs on corporate strategy

Improving the efficacy of CSOs in guiding organisations towards sustainability requires the pressing need to integrate them into strategy formulation and execution. CSOs must be involved in strategic decision-making alongside other C-suite executives to ensure that decisions align and are embedded into the core strategic framework. Collaboration between departments must be cross-functional, to leverage the CSO's expertise by tracking progress towards sustainability goals. Moreover, CSOs must take a data-driven approach to decision-making, incorporating data analytics and metrics to ensure that sustainability performance is being monitored and optimised. This enables organisations to identify trends and risks and address them proactively through sustainability.

To secure long-term competitive advantage, integrating ESG into your business strategy is indispensable, and introducing a CSO is a powerful way to achieve this. Companies should prioritise the CSO’s position within the organisational structure, as this is often a crucial factor for a successful ESG transformation that goes beyond regulatory compliance. In almost all cases, an impactful CSO who reports directly to the CEO and occupies a senior position in the company will have greater authority to set the wheel in motion by articulating a shared vision of the company's ESG objectives and have the influence to achieve them.

How can we help?

Beyond supporting you with your existing or planned sustainability initiatives, our teams can assist your organisation in establishing appropriate governance arrangements for sustainability and understanding the resource requirements for meeting ESG reporting and strategy requirements. This could take the form of a formal CSO position or other, as may apply to your organisation.

In addition, we can help your CSO align sustainability goals with strategic decision-making, leverage data analytics to monitor and optimise performance and develop comprehensive ESG strategies. If you are interested in exploring these opportunities, please contact our dedicated teams.