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The rise of the Chief Sustainability Officer

The rise of the Chief Sustainability Officer

By Jane Crombie, Board and Governance Specialist

The year 2020 saw a tipping point. It became clear that sustainability was becoming a major focus for governments and businesses globally. The primary drivers were the COVID-19 pandemic, the social justice movement (MeToo and Black Lives Matter) and a growing realisation that sustainability and ESG (environmental, social and governance) factors have become central, not peripheral, to an organisation’s strategy and risk management.

The pressure for boards to act on ESG issues continues to build, driven by the expectations of investors, customers, suppliers, employees and other stakeholders. Regulators in Australia and elsewhere increasingly require sophisticated risk assessments and disclosures of both financial and non-financial sustainability metrics. The AICD First Half 2021 Investor Sentiment Index1 revealed that Australian directors believe climate change, the headline ESG issue, is the number one priority the federal government should address in both the short and long term.

A 2021 report by Deloitte and the Institute of International Finance2 found that organisations within the finance sector have demonstrated a range of responses to sustainability, from early establishment of a steering group to formal governance-level ESG committees with sustainability strategies signed off by the board.

With the external environment changing rapidly, and stakeholder scrutiny intensifying, 2020 saw an increase in the appointment of Chief Sustainability Officers (CSOs) globally3. The work of CSOs has traditionally had a strong environmental focus, but the challenges of translating complex scientific, technical and human capital issues to the business context has seen a broadening of the role. In many cases the CSO has been elevated to the executive leadership team, reporting directly to the Chief Executive Officer.

The role of a CSO varies depending on the organisational context. It requires coordination of sustainability initiatives across multiple departments.

Responsibilities may encompass:

  • integration of ESG and particularly climate risks into strategic planning, risk frameworks, remuneration incentives, and regulatory compliance
  • development of ESG risk assessments for large scale projects and within supply chains
  • contribution to data system design for financial and non-financial ESG reporting
  • consultation and communication with stakeholders on ESG and sustainability issues
  • incorporation of material ESG risks into internal audit programs
  • oversight of the organisation’s response to the United Nations Sustainable Development Goals (SDGs).

In addition to managing the risks inherent in the ESG landscape, opportunities that CSOs might consider include reputation and brand enhancement, technological and product innovation, use of sustainable inputs such as renewable energy, and enhanced customer, supplier and employee engagement.

It is timely for boards to review their organisation’s approach to sustainability. Would the addition of a dedicated executive resource assist directors on your board to deliver on their duties as the sustainability landscape continues to evolve?

References

  1. AICD Director Sentiment Index: Research summary first half 2021. Australian Institute of Company Directors. 4 May 2021. https://aicd.companydirectors.com.au/-/media/resources/pdfs/dsi-first-half-2021-report-a4-13pp.ashx
  2. Deloitte and Institute of International Finance. 2021. The future of the chief sustainability officer. February 2021. https://www2.deloitte.com/global/en/pages/financial-services/articles/the-future-of-the-chief-sustainability-officer.html
  3. Weinreb Group. 2021. The chief sustainability officer 10 years later – the rise of ESG in the C-suite. https://weinrebgroup.com/wp-content/uploads/2021/05/Weinreb-Group-Sustainability-and-ESG-Recruiting-The-Chief-Sustainability-Officer-10-years-Later-The-Rise-of-ESG-in-the-C-Suite-2021-Report.pdf

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