The Climate of Business #77: The imminent rise of the Chief Sustainability Officer (CSO)

Climate Change Reality

• How Cincinnati’s Climate Safe Neighbourhoods Partnership promotes climate equity (Yale Climate Connections)
• Smoke from Australian bushfires depleted ozone layer by up to 5% in 2020, study finds (The Guardian)
• Inside the Global Race to Turn Water Into Fuel (NY Times)
• 171 Trillion Pieces of Plastic Trash Now Clog the World’s Oceans (Bloomberg)

• Earth Hour 2023: When is it this year and why is it important? (Euronews)
• Marine heatwaves are sweeping the seafloor around North America (Reuters)
• How an ancient technology could reduce global gas emissions (BBC)
• EU agrees to push for worldwide phaseout of fossil fuels at COP28 (Euro News)
• Biden administration to approve controversial Alaskan oil project (Politico)
• Scientists warn of ‘phosphogeddon’ as critical fertiliser shortages loom (The Guardian)?

Business Climate Reality

• Labour planning ￡8bn Biden-style green energy revolution (The Guardian)
• Silicon Valley Bank Collapse Threatens Climate Start-Ups (NY Times)
• Competition From the US Is Forcing Europe to Up Its Green Game (Bloomberg)
• Guide to US Inflation Reduction Act and effect on climate, health and tax (Financial Times)

• Delta Air Lines lays out its plan to leave fossil fuels behind (The Verge)
• The first rule of ESG: Don’t talk about ESG (Green Biz)
• ECB, Regulators Working on Climate Reporting Requirements for Structured Finance Products (ESG Today)
• Biggest carbon credit certifier to replace its rainforest offsets scheme (The Guardian)?
• Sweden Bans Non-ESG Funds From $90 Billion Pensions Pot (Bloomberg)

Reality Check

The term ‘Chief Sustainability Officer’, or ‘CSO’, has become a buzz-word within the corporate world over the last few years, ultimately raising questions regarding what sparked the exponential rise of CSOs, and what the role of a CSO actually entails.

What is a Chief Sustainability Officer?

The title of Chief Sustainability Officer (CSO) relates to an increasingly vital leadership role within senior management, and is primarily responsible for overseeing the environmental impact of a company or organisation. In doing so, they are in charge of assessing the current and future impact assessment of a company or organisation. Meanwhile, they must ensure that government policies and regulations are abided by within all aspects of their business operations. Accordingly, CSO’s have a vital responsibility to ensure the company or organisation is not intentionally, or unintentionally, engaging in practices that reflect elements of greenwashing.?

“One of the CSO's key priorities – especially early on – is to make clear how sustainability contributes to the business. It is not an either/or but an and. Creating that understanding and linkage of how sustainability drives value is absolutely key. You also need to address how sustainability links up with and strengthens your brand story. Sustainability in itself is not a differentiator, so you need to develop your sustainability narrative.” (PWC)

In doing so, CSO’s ask vital questions such as; how can our waste build capital rather than reduce it? Utilising a circular economy oriented approach to thinking as such will therefore help reduce waste and pollution, circulate products and materials, and regenerate substances.?

The main areas a CSO is responsible for include:

1. Guaranteeing Regulatory Compliance
2. ESG Monitoring & Reporting
3. Managing A Portfolio Of Sustainability Projects?
4. Managing Stakeholder Relationships
5. Enhancing Organisational Abilities
6. Leading With A Culture Of Change
7. Seeking & Experimenting With New Technologies
8. Ensuring Sustainability Is A Central Focus Within Business Processes & Decision Making

The current state of the CSO role?

The exponential growth of the CSO is illustrated within a recent study based upon 1,640 listed companies, whereby it was found companies were hiring more Chief Sustainability Officers (CSO’s) in 2021 than in the previous five years combined. Moreover, the study established that 93%? of these hires were external candidates. Beyond the number of CSOs rising rapidly on a global scale, the report found that around 30% of the 1,640 companies researched had a formal CSO role; whilst another 50% of companies had a CSO role with limited remit.

The factors underpinning the growth of the CSO?

The exponential growth of the term ‘sustainability’ and with the vast growth in the number of CSOs being appointed on a global scale coincides with a growing interest in measuring and ranking ESG by investors and businesses’. Such growth reflects the perspective that environmental, social, and governance (ESG) dimensions should be factored in when considering business success.

• Environment, Social, Governance (ESG): ESG is an acronym that stands for Environmental, Social, and Governance. It is a framework used to measure a business's non-financial performance in environmental, social and governance categories. It is used as a basis for various regulations such as the NFRD, CSRD and the SFDR.?

Specifically, the vast growth in CSO hires over the last few years reflects a necessity to meet the expectations of internal and external stakeholders. Some specific examples of factors driving this expansion include:

• Companies are looking to bring CSOs on board to provide internal alignment and education in order to address growing demands from both employees and external stakeholders, particularly in relation to their environmental footprint, health and safety, energy efficiency, and social responsibility.?
• There is therefore a growing pressure for companies and organisations to bring on a high-level external representative who can serve as a point of contact with internal and external stakeholders in regards to key sustainability issues
• There is an increasing pressure for companies to develop and implement a comprehensive sustainability strategy that is aligned with the company’s specific business objectives and processes. A well-developed and implemented sustainability strategy is increasingly crucial in driving value creation.
• An increase in ESG reporting requirements and directives necessitates a senior management position to oversee reporting issues and financial risk related issues across various departments.
• Finally companies with CSOs are better ESG performers and therefore have a competitive advantage.

The rise of the CSO won’t be slowing down anytime soon.?

The highly dynamic influence of internal and external stakeholders which increasingly shape modern corporations inevitably means that the roles and responsibilities associated with the CSO title will undergo vast expansion in years to come.

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