Sustainability Manager, or Officer, or VP, or Director, or Climate Sustainability Officer (CSO). Whatever name you give this role, chances are you’ve under-scoped the job and it’s hurting you. Fully half of the S&P 500, 57% of the Fortune 500, and 95% of the Global 250 issue annual sustainability reports, but what does that really matter? Should supplemental, unregulated reports that often go unread internally really be critical work product of an executive job? Do you even need such a role in your company or can it be eliminated? Of course you need them, but you need to find a better way to use them.
In general, the executive sustainability officer lacks clarity and alignment with the rest of corporate structure. Don’t believe it? Survey your front line and ask them to name any of the company’s sustainability priorities and how those goals relate to their department. Look at headcount. Sustainability offices at $1B+ companies average 0-5 people. Look at CEO facetime. Few CSOs can report that on a quarterly basis they have even one meeting with their CEO longer than 30 minutes. Companies have little idea what to do with these roles and that's a shame. By and large, sustainability officers are fabulously accomplished (Apple’s Lisa Jackson, Google’s Kate Brandt) and CSOs could be improving corporate governance in a meaningful way. They aren’t. Not even close.
Let’s admit that they aren’t broadly impactful and ask if we’re even asking them to be. When news comes over the wire that a superstar CMO, COO or CFO is hired, investors take note and the ticker moves. What would a powerful, effective, stock-value altering CSO even look like?
Where We Are
Within the last few months, a state-of-the-profession report was published by GreenBiz and Weinreb Group. Their survey of 996 corporations found that although sustainability departments are growing, fully 66% of companies over $1B in size have fewer than five people working on sustainability full time and that 17% had no one at all. This is even more disturbing when you consider where sustainability talent operates within organizations. Sure, the EHS and CSR departments collaborate with CSOs but only 5% of finance departments report having a dedicated sustainability resource even part-time.
What then are sustainability execs doing? To oversimplify, their responsibilities are broken up between three different magisteria. These are:
Environmental Sustainability - carbon footprint, waste/efficiencies created, etc.
Social Sustainability - diversity, equitable employee policies, stakeholder buy-in, etc.
Sustainability Reporting - measuring and collating metrics across business units for reporting
It’s entirely possible (in fact likely) that any sustainability officer has the bulk of her organizational cache in one of these three and very little in the other two. Lens out and you find that there’s no homogeneity between the ‘sustainability’ roles from company to company anywhere in the marketplace. In our offices at Climate|Money|Policy, we have alerts up for open “sustainability” jobs. In the last six months of roles with “sustainability’ in the title, the job descriptions have varied so wildly there’s no way an observer could imagine these were the same profession let alone the same role.
To be effective and add value, CEOs and Boards need to parse some of the current CSO responsibilities and create greater clarity. A good first step is to truncate social sustainability issues like diversity and reposition them as KPIs throughout the company. It’s a mistake to assume that these responsibilities are at home under a CSO just because they grow out of the sustainability discipline. Second, the content and measurement of public/investor reports are better accomplished via the accounting or controller's offices. It may be smart to have a sustainability professional help decide what should be measured but it doesn’t then follow that sustainability execs are best to design and execute the measuring and monitoring of the systems that do those jobs. Third, and most important, get clear on how the organization will be better, healthier, and more profitable with a sustainability officer. If you can’t do that, then don’t hire one until you can.
The Executive Sustainability Officer’s Domain
Where then does the ideal sustainability exec live in a corporate hierarchy? How should we define her cache? Start by unpacking the different roles in the executive suite and it becomes obvious that there’s both a serious responsibility gap and a natural fit for a CSO’s purview: The Future.
The Chief Sustainability Officer is responsible for working relentlessly to gird the company for the future. The job title itself demands that the role is forward thinking. While it’s true that finance, operations and marketing all have forward looking responsibilities and a need to contribute to strategy, no one has a specific mandate to treat the future like an obstacle. No one is responsible for driving behaviors based on intelligence about changes that partners, suppliers, regulators, customers and the market itself will face in the long term.
You may push back and ask, “Isn’t that the CEO’s job?”
The answer is: “No.” Not really. CEOs are responsible for making sure there’s cash in the bank, hiring and keeping the best talent and for setting and communicating a vision & strategy. If they happen to be great at looking forward then they make it into the history books. But for every hall-of-fame CEO, there are dozens of smart, qualified people that ran their companies into the ground because they weren’t looking for market changes or innovations or governance threats that could end a good run abruptly. Consider the case of Peabody Energy; the biggest producer of coal in the US and the biggest bankruptcy this year. How is it possible they didn’t see it coming? Or what about ranchers that know cattle but ignored drought? Ask yourself what engineering firm got fired for not predicting this stadium flood. CEOs need someone with a longer sight line than the average risk manager to work on the kinds of questions that climate change and other substantive risks will pose to an organization. Move away from simple questions of strategy and towards more fundamental questions that strategies are often based on. Questions like, “Is France still a good place to make wine in fifteen years?” or “Will cotton be un-growable in Egypt soon?” or “How many of our warehouses are within ten feet of sea level and does it matter?”
Done right, a sustainability office is a data and research center. It reviews the company for risks and vulnerabilities in relationships, infrastructure, and in systems reliant on outside processes. Great CSOs aren’t just there to measure the company’s carbon footprint. They’re the chief advocates for viewing the company as dependent on and connected to other systems. Systems which are often outside direct control. They advise marketing on demographic concerns, legal on pending regulations, operations on resource constraints, finance on risks and the CEO on what to worry about and how to use changes as a strategic advantage. What does that look like?
Four Examples Of What An Expansive Sustainability Officer Can Do
Let’s go from the overview into the weeds. Here are four tactical projects that an executive sustainability officer could be working on that would better align the role with corporate earnings.
Since 2010 companies have been required to disclose climate-related risks to their investors in annual SEC filings. In practice, companies have largely ignored this requirement. Although there must be occasional good reasons for ignorance, most companies most of the time simply never bother to ask what those risks are. If you’re an investor that should frighten you. It’s absurd for say, a shipping company, to not include a line about the relationship of sea level to its port infrastructure. A savvy CSO would partner with finance and define the norms for their sector to place competitors on the defensive. Instead of shying away from climate risks, a company should take first-mover status and define how a wise investor looks at that the relationship between climate and the sector, especially noting strategic advantages over and weaknesses of competitors.
Unlike other pieces of marketing, a descriptive 10K vulnerability carries a certain ‘no bullshit’ quality that can force the competition to play defense. Imagine what traders and analysts would have asked Peabody Energy five years ago if one of their competitors printed in its SEC filings:
“Costs and carbon intensity of our business require substantive innovation to reduce capital intensity per dollar of revenue. This sector cannot support its current expenses. We project the need for all companies in this field to reduce CapX by 40% in the next five years in order to avoid the need for far higher risk-adjusted returns. We are currently pursuing 55 patents which place us on the track to achieve that goal.”
That’s a big audacious goal with metrics and a timeline. It also boxes in a lot of other players in the industry. An analyst may choose to ignore other pieces of marketing but no doubt Peabody would have been forced to ask how they stack up against this.
Build Adaptation Policies-
The Quadrennial Defense Review is the governing document from which the US Armed Forces make their master plans. Recent versions outline the profound expense involved in adapting military infrastructure to altered climate conditions because substantive impacts are already inevitable as a result of past emissions. That inevitability should be your concern too.
A sustainability office can (and should) amend guidelines that get used for corporate due diligence to incorporate adaptation requirements. Critical suppliers, acquisitions and some partners should be evaluated on their exposure to liabilities like water availability, their local infrastructure’s extreme weather capacity and carbon exposure.
Adaptation should consider your offerings. A +1 to +3 degree world is one where droughts, heat waves, and humidity spikes are longer and more intense. That may be cause to alert engineering about potential changes they should make to the tolerances, durability or suggested operation of some products.
From a finance perspective, there are nearly too many adaptions concerns to count. The most basic is an informed balance between the optimal specs for CapX investments now and what it will be in the different future under several scenarios. (Whole books have been written on this. Suffice it to say, the single most offensive stat in the GreenBiz survey cited above is how disconnected finance may be from climate/sustainability expertise.)
These are the most important places to look but by no means an exhaustive list. Adaptation will be a massive issue moving forward and someone needs to champion it because it’s far too important to be ignored and far too engrossing for the CEO.
Some companies are brilliant at innovation. You know the names: Apple, P&G, GE. Many however are laggards. How many patents did your company file last year? If you think about it logically, a patent represents a current market failure. We’re not doing ‘X’ very well, we should find a way to do it better. So it should come as no surprise that assembling a team to work around an established system gets less attention in most companies.
Innovation and the sustainability office are both definitionally forward looking. Having an executive advocate tasked with identifying current processes that need to be sunset and replaced is profoundly valuable. Arming that same advocate with data about climate, regulation and market changes makes her more effective.
Even when companies are great at innovation, it’s often pigeonholed into product development. The innovation needs of the rest of the organization can be more critical than those aimed at customers but rarely have the kind of enthusiastic, powerful advocates that exist on the client side. An effective sustainability office has the mandate to evaluate internal processes and rank them objectively across the various silos to identify where need and ROI exist to make an investment in new innovations. Value comes when someone pushes against incremental improvements in business units and demands systemic innovation, a demand that can often be lost when weighed against the innovation schedule of products. Yet combining risk management and financial analysis with skilled innovation of internal processes positions companies powerfully against disruption.
Sustainability officers tend to be very visible in industry relations. To their credit, they take prominent positions in trade groups and governing bodies. They also tend to have an above average presence in Washington. What sustainability officers don’t have, and should have, is a strong voice in where corporate financial lobbying is focused.
There’s well documented evidence that companies which deploy lobbyists see a roughly 10,000:1 return on their investment. Without getting into the political argument for or against lobbying, let’s pivot instead to the weird way that money is spent. Financial lobbying focuses largely on tax incentives, loophole building and deregulation. One blind spot that should be attended to is the stake that business has in a robust marketplace and a resilient built environment. The sustainability officer is the best positioned executive to build government relations and leverage corporate PAC money in this regard. If your company relies on rail service it’s wise to support elected officials that can fund good rail lines. If you’re in building materials it’s useful to support legislators who understand the relationship between extreme weather and building codes. Sustainability officers are the most capable storytellers of the relationship between climate, business and good governance.
The Executive Sustainability Officer’s domain is the Future. Not every company needs a sustainability officer but certainly if you’re publicly traded you should give it serious thought. As you do that thinking, consider deeply what portfolio you should be assigning to the role. There’s a good chance that your organization sees decisions relating to diversity, hiring and stakeholder engagement as critical sustainability functions. They are not. They deserve input and criticism from a sustainability head but these aren’t issues that should be complicated by cross-department requirements. Sustainability officers shouldn’t be hired until you see a path for them to improve governance broadly by meaningfully contributing to the way that other departments operate. The sustainability officer is the advocate for change, innovation and communicating threats on the horizon. She prepares the company for the climatically different world which rapidly approaches and prepares investors for threats that the sector will face in a way that advantages the company over its competition.
For all of these reasons you should see now that although understanding of first principles is critical, it’s entirely likely that the best candidate comes from finance, or marketing, or elsewhere, not simply from another company or a non-profit in the carbon disclosure business. CSOs are massively underused; a status quo which is possibly the biggest threat of all to corporate sustainability itself.