What’s a Chief Sustainability Officer?

We have previously discussed the role and responsibilities of chief responsibility officers; however, many companies refer to that position as the chief sustainability officer, or CSO.  In a 2007 White Paper on the changing role of the CSO, Heidrick & Struggles noted that for many years the primary role of a company’s chief environmental, health and safety (“EHS”) leader was to handle audit and compliance matters and interact mainly with permit writers, safety inspectors and low-level compliance staff at regulatory agencies.  However, as companies had come to understand the crucial role that EHS performance played in overall company performance they had begun to recognize that EHS could no longer be treated as a cost center but instead should be regarded as an important strategic asset that could easily become a significant liability if not properly managed.[1]  As such, Heidrick and Struggles found that companies were changing their organizational structures to move away from the traditional practice of having the CSO report into Legal or Human Resources toward a new alignment in which the CSO reported directly to the CEO and interacted regularly with other members of the senior executive team as a peer.[2]  The CSO was also being expected to communicate directly with board members, another sign that the position was regarded as being an important driver of company growth and performance and an architect of overall company strategy.

Heidrick & Struggles cited a range of pressures and sources that were forcing companies to take a new look at how their EHS and sustainability activities were managed including aggressive governmental enforcement activities in the US and in the European Union, financial and legal considerations, concerns about climate change and energy costs and availability, the need to develop new technologies to address environmental challenges and intensified scrutiny from public interest groups and the media into sustainability practices generally and oversight of environmental and social matters in supply chains specifically.  Companies also had to address the emergence of numerous guidelines and reporting standards for sustainability and social responsibility that were changing the expectations of stakeholders regarding corporate performance and communications.  While at first many companies were reacting to changes in their environment as opposed to taking the initiative to transform their businesses to take into account sustainability, most eventually began to appreciate significant business benefits such as enhanced brand, preservation and enhancement of reputation, decreased costs, protection of assets, increased efficiency and competitive advantage.[3]

Creating a list of necessary competencies for an effective CSO, Heidrick & Struggles began with the ability to think strategically, which was described as the ability to look toward the horizon, identify an opportunity or challenge before it affects the company, and develop and implement a strategy to either take advantage of the opportunity or manage the challenge.  Particular attention was given to the creation of business opportunities by the CSO, a marked shift from focusing primarily on prevention, mitigation and compliance.  For example, the CSO can proactively seek out technological solutions to environmental problems that simultaneously reduce costs and improve productivity, a true “shared value” proposition.  A second key competency for the CSO identified by Heidrick & Struggles was the ability to communicate effectively and translate complex technical concepts and strategies into terms that resonated with the company’s top leadership and key constituencies (i.e., employees, investors, lenders, insurers, rating agencies, customers, suppliers, the media and the public).  When communicating the CSO needed to be able to adapt his or her tone and approach to a wide range of audiences ranging from the CEO, directors and regulators to each of the employees who would be called upon to change their skills and behaviors in order to execute the sustainability strategy.[4]

While strategic and communication skills were at the top of the competency list, Heidrick & Struggles pointed out that the CSO must also have or quickly develop a a wide range of interdisciplinary and cross-functional competencies, including the following[5]:

  • Ability to hire, lead, develop, and inspire a diverse staff and to develop trusting relationships with a variety of company constituents before an issue becomes a problem.
  • A solid grounding in a wide range of EHS requirements, processes, procedures, technologies, and, depending upon the scope of the operation, familiarity with these issues at the local, state, federal, regional, and international levels.
  • A knowledge of financial operations that extends beyond budgeting to include project financing, corporate finance, an understanding of how finance intersects with EHS and sustainability, and the ability to make a business case for a new direction.
  • Knowledge of the company’s processes, products, technologies and business processes coupled with the ability to manage EHS systems within the company and the ability to assess and audit those systems with vendors, suppliers, and distributors.
  • Familiarity with technological and process advances and an understanding of the trends in EHS and the influences on the company and the industry segment.
  • Ability to communicate with community leaders and activists and to communicate with the media in a crisis.
  • Ability to develop and manage a marketing campaign related to the EHS and sustainability aspects of the company’s performance, products, or liability.

Heidrick & Struggles reported on the important role that the CSO can play with respect to development and implementation of EHS and sustainability strategies and policies.  For example, one of the companies described in the White Paper explicitly integrated EHS and CSR and created a Corporate Social Responsibility Council that included the company’s equivalent to the CSO position, the CEO, two of the company’s ten business unit managers, the Chief Technology Officer, Chief Strategy Officer, Director of Human Resources, Director of Communications, and the Marketing Manager.  The Council met several times a year to set and evaluate the company’s EHS and CSR policies and the CSO was responsible for ensuring that those policies were understood and implemented throughout the organization through an extensive network of some 200 EHS managers.  In order for this type of structure to work, the CSO must have a clear understanding of how things work throughout the organization and the skills to participate in the design of appropriate management systems so that information can flow upward and downward and be available for use in reporting to directors, the CEO and other members of the executive team and the company’s stakeholders.

Comments from various interviews with CSOs included in the White Paper emphasized the important of the CSO being able to drive employee engagement through his or her vision, communication skills and demonstrated enthusiasm.  As a promoter of significant change throughout the organization the CSO must be able to understand human nature and behavior, build trust, forge alliances and facilitate collaboration among people, departments and external stakeholders.  Also, since sustainability challenges cannot be tackled and resolved by any one company, the CSO must be able to work effectively with broader initiatives focusing on particularly environmental and social issues, perhaps assuming a leadership position in those initiatives, and convince other companies in the same industry to stand down from their day-to-day competitive views of one another and develop appropriate new standards that would benefit them and their customers and employees and fend off regulatory intrusion.  In that regard, Heidrick & Struggles reported that CSOs were serving on senior-level advisory groups and associations aimed at influencing public policy developments and regulations or dealing proactively with specific challenges to their particular industry or value chain as a whole.[6]

[1] A. Luijkenaar and K. Spinley, The Emergence of the Chief Sustainability Officer: From Compliance Manager to Business Partner (Heidrick & Struggles International, 2007).

[2] Heidrick & Struggles found that many companies were expanding EHS, areas which had already been combined for a number of years, to include sustainability and corporate social responsibility and referring to the leader of activities in the expanded area as the CSO.  Id. at 3.

[3] Id. at 6-7.

[4] Id. at 9.

[5] Id. at 10.

[6] Id. at 3.

For further discussion see Strategic Planning for Sustainability prepared and distributed by the Sustainable Entrepreneurship Project.

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