Category Archives: Sustainability for Small Businesses & Startups

Morning Walk: Sustainability Leadership for Your Startup

Larger companies have the resources to support all of the activities of a chief responsibility officer or chief sustainability officer including the creation and maintenance of a dedicated group or department to focus solely on developing and executing a sustainability-related strategy.  Sustainable startups do not have that luxury, yet sustainable entrepreneurs must recruit a sustainability leader during the first days following the launch of the business in order to establish a foundation for all of the sustainability-related initiatives that will be required as the company grows and help the fledgling company establish credibility and legitimacy with respect to sustainability among its stakeholders.

There will be a temptation to choose someone who already has important responsibilities with respect to human resources or operations to serve as the startup’s sustainability leader.  In many cases the founders will have no choice given that there is insufficient capital to fund a full-time sustainability leadership position.  However, every effort should be made to make sustainability the primary responsibility of the sustainability leader and provide him or her with enough time and other resources to effectively take on the required tasks.  In turn, the sustainability leader needs to understand that he or she is working in a startup situation and that “all hands on deck” will be the operating principle for months, if not years.  As such, he or she should be comfortable with addressing the broad range of potential issues and activities that can be placed under the sustainability umbrella including environmental, health and safety matters; recruiting a diverse team; volunteering and other philanthropic initiatives and community engagement.

The startup sustainability leader needs to have certain specific skills and personality traits.  He or she needs to be able to think strategically, not only using the traditional and formal tools of strategic and financial planning but also being able to grasp and implement important concepts such as strategic philanthropy and creating “shared value”.  The ability to clearly articulate and communicate the company’s mission and purpose, as well as the company’s sustainability commitments, is also essential since the sustainability leader will, along with the CEO, be on the front lines of engaging with the company’s key stakeholder constituencies.  Beginning with new hires and community groups, the sustainability leader will need to engage in dialogues to explain the company’s sustainability mission and commitments and gather information from stakeholders regarding their concerns, goals and objectives and expectations regarding their relationship with the company.  Communication skills will also be needed in order for the sustainability leader to participate in broader initiatives on environmental and social issues that the company needs to join in order to establish itself within the sustainability community and gather the knowledge and connections necessary for it to ultimately become one of the recognized leaders in its area of activity.  The sustainability leader also needs to have knowledge of the company’s processes, products and technologies in order to help the CEO and other senior managers identify sustainability-related opportunities and risks.

Perhaps the biggest contribution of the startup sustainability leader is contributing to the creation of an organizational culture in which dedication to sustainability is firmly embedded.  When the position is created and the CEO and candidate for the position sit down to discuss whether or not to proceed, both parties need to take the measure of the other and confirm a commitment to building a sustainable enterprise.  The sustainability leader needs the enthusiastic, authoritative and public support of the CEO and the CEO needs to know that the sustainability leader will be able to help the CEO follow through on the sustainability commitments he or she will be making to board members, investors, employees, customers and community members.  The sustainability leader needs to be involved in the vetting of each new team member and work with them to explain what sustainability means to the company and the role they will be expected to play in building a sustainable business.  The sustainability leader needs to plant the seeds for what will eventually become larger environmental and social projects: launch recycling programs; encourage telecommuting; offer employees opportunities to volunteer with community-based nonprofits; lay the foundation for certified B corporation status.  All this will take time and substantial amounts of energy—the sustainability leader should expect to meet regularly with everyone in the organization during the first few months while the size of the team remains manageable—and will often seem daunting given the paucity of resources; however, the good habits formed will serve the company well as years go by and the company’s core competencies with respect to sustainability emerge.

For further discussion see the Sustainable Entrepreneurship Project’s materials on Sustainability for Small Businesses and Startups.

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.

What’s a Chief Responsibility Officer?

Rangan et al. argued that well-managed CSR creates social and environmental value, while supporting a company’s business objectives and reducing operating costs, and enhancing relationships with key stakeholders and customers.[1]  Rangan et al. joined others in recommending that companies establish an independent full-time position to oversee CSR and sustainability (they referred to this position as the “Chief Responsibility Officer” (“CRO”)) and who would have access to the CEO and input into the company’s business strategy.  Rangan et al. emphasized that it was important for the CRO to hold that position as his or her primary responsibility, noting that too many companies delegated CSR oversight responsibilities to human resources or operations managers who were only able to devote a portion of their time to that job while continue to spend most of their time on their day-to-day line responsibilities.

The CRO should be given the resources to do his or her job in the form of a dedicated CSR unit that would be formally and publicly tasked with coordinating and integrating CSR initiatives across the organization, even if responsibility for implementation of the various initiatives remains dispersed throughout the company.  While the CRO cannot attend every planning meeting or event, representatives of the unit can be knowledgeable participants for each program including have decision rights in the design and execution of programs.  The knowledge collected from the activities of the CSR unit will allow the CRO to elevate strategic CSR topics and priorities to the highest levels within the organization quickly and effectively.[2]  Rangan et al. conceded that coordinating a company’s CSR initiatives in a strategic manner is a challenging task given that companies may be engaged in a diverse set of programs that include philanthropy, value chain activities and wholesale business transformation that may be driven and led by a range of actors including community affairs managers, operations managers and members of the executive team.

Rangan et al. pointed out that having CSR represented in the C-suite serves as a catalyst for the strong leadership and support for CSR initiatives that must emanate from the senior executive team in order for those initiatives to capture the imagination and energy of employees and other stakeholders.  The CRO should be sure that CSR is taken into account when business strategy is being discussed and established in the boardroom and in meetings among senior executives and should take the lead in communicating with operations managers about how budgets and performance metrics for particular programs have been established taking into account CSR priorities.  The CRO should also join the CEO in engaging with stakeholder groups to explain the company’s CSR strategy and obtain feedback and address concerns.  Finally, the CRO should be responsible for ensuring that the company adheres to the continuous process of auditing and evaluating its CSR activities necessary for a coherent and effective CSR strategy.

[1] K. Rangan, L. Chase and S. Karim, Why Every Company Needs a CSR Strategy and How to Build It (Cambridge MA: Harvard Business School Working Paper 12-088, April 5, 2012), 21.

[2] Id. at 21-22.

For further discussion of the model proposed by Rangan et al. for developing a CSR strategy, see Strategic Planning for Sustainability prepared and distributed by the Sustainable Entrepreneurship Project.