Rise of the chief sustainability officer

John Daly reports on how a focus on sustainability is creating challenging new roles across many Irish industries
Rise of the chief sustainability officer

A chief sustainability officer can make a real impact supercharging sustainability transformation, according to one CSO survey. 

With an increased focus on sustainability, in addition to environmental, social and governance issues, more and more companies are recognising the value and importance of appointing a chief sustainability officer (CSO).

Driven by the demands of stakeholders, companies are rapidly increasing their focus on sustainability and Environmental, Social and Governance, with the associated transformation putting CSOs at the heart of change in their respective organisations.

The CSO’s role encompasses a variety of areas, including the development or execution strategies to address issues such as energy use, resource conservation, recycling, pollution reduction, waste elimination, transportation, education, and building design.

A report by Deloitte and the Institute of International Finance expects the role of the CSO to gain prominence over the coming years, and emerging as the ‘sense-maker in chief’ in the organisation.

They are being asked to interpret changes in the external sustainability environment and work out the strategic consequences for their firm. The CSO is also charged with influencing, communicating and cutting through the organizational complexity to allow their firm to deliver on ESG commitments.

While managing factors such as water consumption and energy usage, they are also tasked with creating adequate safety procedures, assessing the working conditions in their supply chain and evaluating products which particularly address environmental problems.

Given that the choices companies make in their production, distribution and investment can directly impact on the environment. Whereas past practice was dedicated to profitability ahead of all else, nowadays investors are increasingly focused on being environmentally and socially responsible.

A new study reveals that the importance of a CSO is increasing — in 2021 alone, the number of CSO appointments was more than the previous five years combined. Companies with CSOs in place are also better ESG performers, with 53% of Irish plcs surveyed having a formal CSO role with a powerful mandate.

These are some of the key conclusions from the Chief Sustainability Officer Study by Strategy&, PwC's global strategy consulting business, which surveyed 1,640 listed companies around the world, including Ireland.

Kim McClenaghan, a partner in PwC Ireland's Sustainability practice, said: “The study demonstrates that Irish plc companies are serious about sustainability and ESG with over half of these organisations having a formal CSO role. ESG transformation affects all areas of a business and the CSO plays a key role in defining and pursuing sustainability goals.

“But with roughly half of all CSOs being two or more hierarchy levels below the C-suite, the research also suggests that too few CSOs have sufficient access to the board. The appointment of a CSO is key and once appointed, they should have sufficient access to the board to enable real impact and influence to shape the sustainability transformation. 

A board-level CSO also signals that sustainability is as important to a company as, for instance, its finances or human resources.” 

He adds that for long-term success in ESG transformation, sustainability cannot be an add-on task within another division of the company, but should be centralised with one person, the Chief Sustainability Officer, and, ideally, at top-management level with direct access to the board.

CSO role supercharging sustainability transformation

Over half of Irish plcs surveyed had a formal CSO role with a powerful mandate, compared to 30% globally and 35% for European companies.

However, all Irish companies surveyed had either a formal or informal CSO role, compared to a fifth of global companies who had no CSO function at all. The survey also revealed that the greater a company's revenue, the more likely they are to have a formal CSO in place.

In Ireland, eight out of ten companies surveyed with revenue in excess of €10 billion had a formal CSO appointed. But where revenues were less than that, only 22% had a formal CSO in place. The number of CSO positions is growing rapidly. In Ireland, over half of the CSOs were appointed in either 2020 or 2021, and more than doubled the total number of CSOs in place in these companies prior to 2020. Globally, there were more CSOs appointed in the companies surveyed in 2021 alone than there were in the period 2016–2020.

According to the survey, a well-established CSO can also make a real impact supercharging the sustainability transformation. The research reviewed the ESG rating from Refinitiv — one of the world's largest providers of financial markets data — for 1,455 companies globally.

Among the companies that scored an A rating, almost all had an executive with at least some sustainability responsibility, highlighting that companies with CSOs in place are better ESG performers.

Doone O'Doherty, partner, PwC Ireland People and Organisation, said: "Having a CSO on the executive board or reporting directly to the CEO or another board member helps educate and upskill the executive team on evolving ESG issues. It also allows the CSO to better influence strategy and operations in order to align commercial and sustainability objectives, which ultimately delivers better long-term value for the company.

“The research demonstrates that more and more companies, both in Ireland and globally, are recognising the value of appointing a CSO. We expect this trend of growth in CSO positions to continue. As the number of roles expand, organisations may struggle to find appropriate personnel to fill the available roles. With that in mind, it's important to act now to limit the likely impact of any skills shortage on your organisation."

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