Closing the skills gap.... a threat or opportunity?

Throughout 2022, as the macro-economic backdrop grew more complex and volatile, many of us detected cracks materialising in the corporate world.

As an executive recruiter and advisor to CEOs and boards, these cracks appeared to me as a series of widening gaps: in expectations, skills, and future preparedness.

Some of these gaps and observations have been evidenced in our Teneo’s Vision 2023 survey of 300+ global public company CEOs and institutional investors, which throws forward to an even less predictable year ahead. ?As our chairwoman Usrula Burns declared in her commentary on the report, there will be “clear winners and losers” in this disrupted, de-globalising business environment.

So, to kick off my new Thought Leadership series for the year, I wanted to share some observations in two of our focus areas – #ESG and #investorrelations – and in particular what Boards, CEOs and executives can do to narrow those gaps and set themselves up for success in #2023 and beyond.

Narrowing the ESG skills gap

According to our survey , even in the face of a looming recession, 15% of CEOs are prioritising investment in ESG (Environment, Social & Governance) over business performance, and more than 60% of CEOs and investors are working to balance company performance and ESG commitments. That is especially the case in Asia-Pacific.

But despite the ongoing commitment to ESG-related activities, many large company CEOs (nearly one in five) feel unprepared to handle the next controversial social issue that emerges.

That is reflected in another recent survey reported in the AFR (Australian Finacial Review) which shows that remuneration for senior Sustainability professionals jumped 12.5 per cent in the past year to almost A$350k+, well outstripping rampant inflation.

We have observed a similar surge in demand for Chief Sustainability Officer (CSO) and ESG-related leadership roles (including Chief Risk Officers) which is not being met by supply and is therefore pushing up prices for talent.

With higher remuneration comes higher expectations from CEOs and CFOs who are themselves trying to meet the ballooning expectations of investors conducting forensic analyses of companies’ ESG reporting. ESG fundies want hard, solid numbers not greenwashed fluff.

Executives looking to develop an ESG-career should therefore consider their aligned experience and which skills they need to work on, so they can meet and exceed those expectations.

Communicating the ESG story internally and externally is vital to both inspire positive change and to have it acknowledged, but the CSO role is rarely a simple parlay from say, a traditional Corporate Affairs role.

For a start you need serious scientific and data analysis smarts to ensure the right information is caught so that measurable improvements can be made and demonstrated right across the company and its supply chain.

If you’re working for a multinational, you need to position your ESG strategy globally but also be across multifarious legislation and regulation across the globe on topics as diverse as human rights and climate change.

And while you’re aiming for the stars in terms of making a difference, you’d better have your feet on the ground and the commercial acumen to balance your sustainability targets with tough business goals.

I have been pleased to see many Boards beginning to recognise that ESG is a wholly new discipline requiring a fresh cocktail of skills.

But given the current skills gap in our region, some companies may need to adjust their short-term expectations when it comes to hiring and start planning for the long-term.

They may decide to hire a CSO candidate with an amazing attitude and a great CV who nevertheless needs development and support in some of the areas above, all the while investing in education and mentoring to foster the next generation of ESG leaders.

Narrowing the IR skills gap

In 2022, more was asked of Investor Relations leaders too, and we witnessed a similar gap between market demand and the supply of talent.

While?the?Investor Relations Officer’s (IRO’s)?core responsibilities remain unchanged,?the?role is?becoming much broader?and more sophisticated.?

In tandem, as with pure ESG roles, corporate and investor expectations about the capabilities required for the role are climbing too.

I am thrilled to see recognition of the growing importance of the IRO role because traditionally, IR has not been taken as seriously in Asia Pacific as it has in Europe and the US. Management is increasingly seeing that a good IRO is an indispensable asset, in partnership with Corporate Affairs, as a channel to?maintain?and boost company?reputation and value,?and access?the capital?required?for investment and growth.

But due to relative immaturity of the discipline here, and the quantum leap in companies’ expectations of it, I often see a gap between what they are looking for in IR leaders and what might be available in the local market today.

We know of several large companies that have spent nearly a year searching for an IRO who can demonstrate the capabilities they are demanding, with no luck. They are looking for something that doesn’t yet exist in sufficient supply in this market.

Our advice is often to seek out an individual with the mindset required for IR leaders in the new landscape, and some pieces of the skill puzzle that make up the new role. Then invest in that person – develop and grow them so they quickly gain the necessary experience and skill set required to have real impact.

To get the most value from their IRO, companies also need to set them up to be effective. As a recent Harvard Business Review article said, the “IRO must be part of a unified Board and C-suite investor planning group, and their responsibilities should include building and sustaining credibility with long-term investors and providing useful information on a timely basis”.

To the aspiring IR professionals and IROs out there, my advice is …..If you’re willing to push yourself, the expanding role and increasing status of IR creates greater opportunities for job satisfaction and career progression.

But don’t wait for your organisation to upskill you.

Understand what the elevated role requires, identify the key gaps in your own skill set, and seek out opportunities to fill those gaps. Joining a professional association, like the Australasian Investor Relations Association (AIRA), is a great place to start.

Who knows what fresh disruption we will encounter in 2023 in geopolitics, business, markets, technology, and societal change.

But we do know that there is a yawning gap in our future preparedness beyond just the next 12 months. According to our survey, only 28% of CEOs indicate that their current executive teams represent the perspectives of future generations.

You can take that as a threat or an opportunity.