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Why companies need sustainability officers

cso

A chief sustainability officer's (CSO) role is to specifically monitor, champion and improve environmental and social performance. PHOTO | SHUTTERSTOCK

Summary

  • Sustainability — maintaining a balance between profit, planet and people goals — is hardly a static undertaking, but a fluid one since social expectations are ever in flux.

As sustainability gains currency among organisations so is the need for chief sustainability officers (CSOs) whose role is to specifically monitor, champion and improve environmental and social performance.

Sustainability — maintaining a balance between profit, planet and people goals — is hardly a static undertaking, but a fluid one since social expectations are ever in flux.

It, therefore, helps to have a dedicated manager — the CSO, also known as a chief environmental officer — steering the ship. However, less clear is the CSO’s remit and how the role affects a company’s sustainability performance.

Having arrived on the corporate scene only over the last two decades, the CSO is still evolving. To be clear, this role varies from industry to industry and from company to company.

The CSO’s main job generally is to monitor and identify areas of concern and action and to offer suggestions on how the company might be able to perform better. This involves more engagement in socially responsible activities and less in irresponsible ones.

Impact of CSOs

The CSO could be seen as a change agent. The officer foresees how the future is developing and tracks shifts in social expectations as well as changes in regulations and the business landscape.

He/she then decides what to change concerning how the company is interacting with the communities and the broader societal context in which it operates.

Studies indicate that companies with a CSO tend to engage in more socially responsible activities — such as investments to reduce carbon emissions — and fewer socially irresponsible activities like polluting the natural environment. In other words, a firm can improve its sustainability performance by appointing a CSO to the C-suite.

In light of climate change and social upheavals fanned by globalisation and urbanisation, more and more companies are monitoring the impact they are having on the natural environment as well as on society.

They are increasingly coming under pressure to embed environmental, social and governance (ESG) commitments in their investment decisions. Regulators and investors are asking for sustainable operations and products, customers are demanding it, and employees are expecting it.

While for some firms, sustainability is almost entirely tied to environmental issues such as water and energy use, others are stretching their efforts further by improving working conditions in their supply chain and creating better safety procedures. Some are even making profits from products and innovations that promise to address environmental and social problems.

Companies across the globe are most often engaged in sustainability in three ways.

First, there is the compliance phase. In this initial stage, companies often start with activities related to complying with regulations. Here, activities are not necessarily strategic. Most companies at this stage have not yet created a formal CSO position.

The next stage is the efficiency phase where companies become more strategic about sustainability by finding ways to achieve efficiencies that will save them cash, such as cutting energy and water use or reducing waste generation through recycling. It is at this stage that companies are likely to hire or appoint a sustainability officer, who works closely with the CEO. The CSO is often tasked with building a business case for making changes that improve the company’s bottom line, while also protecting or enhancing the company’s reputation.

Higher up the corporate sustainability ladder is the innovation phase.

Unfortunately, only a handful of companies have managed to transition to this advanced stage marked by the integration of sustainability into the core of the business in ways that transform the company. Here, strategies tend to be driven by the market, the goal being to maximise long-term profitability while sustainability efforts are designed to address bigger social problems, including climate change and natural resource management. Here, the ultimate responsibility for sustainability goals shifts from the CEO to CSO.

At the innovation stage, enterprises focus their strategy from an inward perspective to an outward focus.

The question becomes: how can we enable our customers, suppliers and others to behave and operate more sustainably? It allows a firm to envision new markets, new opportunities and new needs.

Many companies do not make it to the innovation stage because they focus only on short-term goals like the cost savings they achieve from reduced energy. Organisations tend to be afraid to raise the stakes and make bigger bets. Given that it is not easy to make this transition, it makes a strong case for firms to have a dedicated CSO to reimagine new possibilities.

In conclusion, adding CSO to a firm’s executive suite should be done in the knowledge that sustainability goals are bound to change over time. Therefore, the best approach to adopt is evolutionary, not revolutionary.