Does You Need a Chief Sustainability Officer?
There is an upward trend in companies hiring Chief Sustainability Officers (CSO) to drive climate goals such as reductions in greenhouse gas (GHG) emissions. It's not an easy job to fill. That's because it generally requires some business transformation and therefore necessitates a transformative leader.
But does your company need a CSO?
That depends on how a CSO can create value to satisfy company stakeholders.
Consider your shareholder, employee and customer interests when assessing the need for a CSO.
Investor Stakeholders
A survey of 600 institutional investors in six countries by consultancy Edelman found the vast majority believed that companies which prioritized ESG or climate initiatives delivered better long-term returns and merited premium valuations.
Below are some additional insights.
- According to a McKinsey study, financially sound companies that integrated climate policies into their growth strategies were twice as likely as their peers to generate a 10% increase in revenue.
- According to Investors Business Daily, by next year, 11% to 15% of U.S. investment managers will put 40% of their portfolios into companies with climate policies.
- According to a Morgan Stanley report titled, Sustainable Signals, more than half of investors say they plan to increase their allocations to sustainable investments in the next year. More than 70% believe strong climate practices lead to higher returns.
An increasing volume of investors are making investment decisions that include a company's climate policy, GHG reporting, carbon reduction ambitions and science-based targets.
So, when a CSO delivers climate reporting, demonstrates real progress in lowering GHG emissions, and integrates climate and commercial interests, the company can attract more capital, lower the cost of capital and improve liquidity.
But be clear. It's not enough to deliver a carbon footprint report. You have to link climate policy and actions with business strategy, value creation, and financial performance.
It's the CSOs job to ensure that investors understand how the company leverages climate growth levers to create competitive advantage and increased value.
Employee Stakeholders
Employees are another company constituency.
According to Gallup, 84% of Gen Zers review a company's purpose when evaluating a job opportunity. Every other age group shows a double digit increase from just five years ago in making the same evaluation.
Below are similar findings.
66%
27%
24%
56%
Gallup found that 66% of job seekers say that a company’s climate commitments strongly influence who they will work for.
According to Deloitte, 27% of job respondents indicated they factor the company's climate position into their decision to accept a job offer.
Deloitte also advises that 24% of employees considered switching jobs to a more environmentally friendly company.
A survey by GetSmarter found that 56% of staff are more inclined to stay with companies with strong climate records.
When the CSO can integrate the climate agenda with the corporate culture and company brand, he or she can drive performance improvements in recruiting responses, time to hire, employee tenure and employee productivity.
If these types of measures are important to your company, it may be time to hire a CSO.
Customer Stakeholders
Customers are another constituency. A wide body of research shows that a large and growing percentage of consumers and B2B buyers are directing their purchases toward climate friendly suppliers.
And there is an additional upside for these suppliers. Research from IBM shows that 57% of customers are willing to pay a premium to brands that are environmentally responsible (source: Meet the Consumers Driving Changes.) Similar research from PwC shows that 80% of consumers will pay 5 percent or more for sustainably sourced goods (source: PwC Global Consumer Insights Pulse survey.)
Below are some additional insights.
12%
22%
2X
48%
Consumers are willing to pay 12% more for sustainable products (Bain & Company)
22% of buyers advise they always make climate-conscious purchase decisions (Kantar)
Products marketed as sustainable have grown 2 times faster than those not marketed as sustainable (NYU Stern)
48% of people often or always consider a company's environmental record when deciding whether to recommend a product (PwC)
Lat year the volume of eco-active buyers rose from 18% to 22%. The volume of eco-considerer buyers rose from 38% to 40%. This is a continuing trend that shows no signs of slowing down.
Even better, buyers will pay a premium or switch brands for eco-friendly products and services.
It's the CSOs responsibility to leverage climate policy for differentiation and a competitive edge. He or she must integrate climate policy and reporting with target audiences of environmentally conscious buyers.
That may include new customer segments, transparent climate reporting, printing carbon disclosures on product labels, or promoting messaging such as decarbonization results.
One More Option to Consider
A fractional Chief Sustainability Officer is an option for companies that want to take a steppingstone approach.
This role is generally staffed by an expert so the company can acquire a leader that brings experience, best practices and know-how. This dramatically reduces ramp up time, learning curves and extended planning periods. In fact, in our experience, it shifts execution from a journey of experimentation to an optimized pursuit of financial driven metrics.
This part-time and generally outsourced role provides added financial benefits such as a lower cost than a full-time equivalent and little or no overhead or burden costs.
So, is it time to Hire a Chief Sustainability Officer?
If your investors, shareholders, customers and employees will reward your company for becoming more sustainable, or there is a realistic downside from failing to act, it's probably time to hire a CSO.
But recognize that for most companies, the CSO role itself is only sustainable if it delivers measurable economic value to the company and its stakeholders.
Also recognize that without a central leader, any climate program is likely to incur fragmented leadership and a loosely defined, consensus by committee agenda. This then cascades into continuous delay, duplication of efforts and internal competition for resources. This overlap is inefficient, costly and delays progress.
So, once you recognize sustainability as a business imperative, it's time to hire a CSO.