The hunt for the green people

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??This week: If you’re looking to hire a chief sustainability officer (CSO), would you hire someone who:

1. Has a strong background in sustainability or environmental science but isn’t familiar with your business or industry; or
2. Is very familiar with your business or industry, but has only a modest understanding of the science and regulations of sustainability?

An analysis by The Business Times found the 26 largest Singapore-listed companies that had appointed CSOs were split on this question. Of the 28 CSOs from those companies (two of the companies were deemed to have two CSOs each), only 13 were holding sustainability-related roles when they were hired. Eleven were holding roles related to operations or strategy when they were appointed, including four whose roles had also been sustainability-related.

Note that the analysis assessed prior experience based only on the last-held job title when a CSO was hired. This means that the data does not capture CSOs’ earlier appointments, or whether the CSOs had obtained relevant education or training in sustainability-related areas.

Even allowing for those limitations, it appears many companies have appointed CSOs who did not have significant prior experience in leading sustainability functions. Why is that?

Anecdotally, the most cited reason is that there simply aren’t enough candidates out there with the right qualifications. That is probably right to a certain extent. The business sustainability field has only become mainstream in the past few years. The auditing profession doesn’t even have a common set of standards on sustainability reporting.

Yet, a separate study by National University of Singapore Professor Mak Yuen Teen found that about three-quarters of CSOs among Australia’s largest-listed companies had prior ESG experience. In Prof Mak’s study, prior ESG experience existed in about 52 per cent of Singapore CSOs at the time. The question, then, is whether the lower percentage in Singapore is truly a question of insufficient supply, or something else.

That “something else” could simply be a poor hiring culture. Companies could be falling back on internal candidates – whose chief qualifications are that they have some adjacent experience and are passionate about sustainability – before they’ve turned over enough stones.

A good many of the appointees have managed to make successful transitions to CSO. But it’s worth asking whether the transition could be faster, or whether the outcomes could be better, if companies take the trouble to find candidates with stronger sustainability-related credentials.

After all, between helping a sustainability expert learn about a company, and helping an operations veteran learn about sustainability, one would assume the company would be better able to carry out the former.

Furthermore, executive-level sustainability expertise has become more difficult to acquire on the side, through training or outsourcing. Perhaps it was more feasible in the early days. But the field of sustainability has become substantially more sophisticated over the years, and it is evolving at a rapid pace. Carrying out a large company’s sustainability function today in a way that can satisfy the demands of regulators, customers, bankers, investors and other stakeholders is a complex and technical challenge that requires strong expertise.

?? Top ESG reads:

1. It’s not too late to nominate people and businesses who have had a positive impact on the environment and community for the inaugural Sustainability Impact Awards.
2. City Developments Ltd now reckons that not addressing climate change could cost the property group S$120 million in 2030, 1.5 times its previous estimate.
3. Insurance broker Marsh is offering preferential terms for director and officer policies in Asia to companies with strong ESG performance.
4. Regulators in Asia will take aim at fund labelling in 2023, says ISS ESG, the responsible investment arm of the institutional advisory firm.
5. Progress at this year’s COP28 hinges on the puzzling Sultan Al Jaber, who straddles both the renewable and fossil fuel industries and will head the climate summit for the United Arab Emirates.
6. The European Sustainable Investment Forum is expected to drop vague “integration” strategies in its definition of ESG funds.

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