In recent years, the role of the chief sustainability officer (CSO) has moved from the corporate sidelines to the centre of business strategy.
This transition signifies more than just organisational restructuring — it emphasises the heightened importance of sustainability beyond mere compliance. While some firms adopt sustainability for reputation management, others view it as a genuine lever for value creation.
A new report titled, From Sustainability to Business Strategy: How the Role of the Chief Sustainability Officer is Evolving to Shape Business Strategies delves into the transformation of the CSO role. This report is a collaboration between Emeritus and the Leonardo Centre at Imperial College Business School.
Drawing from a database of 900,000 sustainability initiatives from 45,000 reports by over 9,000 companies over the past 20 years, it investigates how the evolving role of the CSO is influencing both businesses and society.
The report aptly points out that sustainability, once viewed as a specialised communication function, now shapes core business strategies. This evolution indicates that a company’s social and environmental impacts are not just markers of corporate responsibility but can be a competitive edge, fostering innovation and collaboration.
Apart from the vast dataset, the study offers insights from 37 CSO interviews across nine countries and 17 industries.
The report reveals several intriguing findings. About half of the CSOs interviewed had been appointed within the last year to 18 months, emphasising the role’s rising prominence. Companies are on the lookout for individuals with visionary skills in line with sustainability leadership.
Of the CSOs interviewed, two-thirds possess backgrounds in business, economics, or engineering, while only 30 percent had directly studied sustainability topics.
Furthermore, hierarchy matters. A CSO’s influence is closely tied to its positioning within a company’s organisational structure. This illustrates that there is strategic importance in positioning of the role.
The report does more than just catalogue this evolution. It introduces the Business Impact Maturity (BIM) model, as a tool designed to gauge a company’s maturity in integrating sustainability.
A firm’s maturity level is mirrored in its capabilities, mindsets, behaviours, and stakeholder involvement. This model assists businesses in self-assessing their sustainability integration using five maturity stages across ten clearly defined dimensions.
Another key observation is that firms are increasingly defining sustainability as a business target with 86 percent of the surveyed companies setting managerial incentives based on impact performance.
Businesses at higher levels of maturity in sustainability integration outpaced their peers.
Over a 12-year span, high-maturity portfolios surpassed the S&P 500 index by 92 percent. In contrast, those at a lower maturity trailed the index by 70 percent.
However, firms often find themselves in a delicate balance between meeting business targets and advancing sustainability efforts. This highlights the urgency to weave sustainability into business strategies and align it with incentive structures.
Another challenge spotlighted by interviewees across different industries is hyper-regulation, which often makes it hard to approach sustainability as going beyond compliance to impact creation.
Additionally, there’s a noticeable sustainability skills gap. For example, many companies have to rely on third parties for sustainability reporting, relying on such external expertise for impact metrics, impact measurement, and carbon accounting.
This necessitates that businesses enhance these skills in-house and cultivate the appropriate talent. A crucial factor here is experimentation, which has proven essential in unearthing new innovations and strategies that can help firms expedite their sustainability impact.
In conclusion, the CSO’s role is not merely evolving– it’s reshaping the core of business. In a world facing immense challenges, from climate change to socio-economic divides, businesses hold significant responsibility.
As this report highlights, for many multinationals worldwide, the CSO and sustainability are central to this transformation, guiding business strategy and bridging the divide between doing good and doing well.
Wambui is a Sustainable Finance Specialist.
Shah is Group Director of Sustainability at Equity Group Holdings Plc.