Why sustainability officers are important – but could eventually disappear
All large corporates now have sustainability officers. But what do they do? And how might their role change as the circular economy grows?
It only takes a quick glance at the headlines to spot the high profile of chief sustainability officers (CSOs). Noel Kinder, Nike’s CSO, recently announced that the sportswear maker’s European offices will be powered by renewables by 2020; it fell to Ruth Kimmelshue, CSO at agricultural commodities trader Cargill to explain why the company will not meet its goal of halting the conversion of forests into farms by next year; Allianz Global Investors, one of the world’s largest investors with €565 billion in asset under management, recently named Beatrix Anton-Groenemeyer as its first CSO.
What do these people do? And why is their profile growing within companies and the media? The role of a CSO varies greatly according to the company, its sector and its philosophy. Obviously, some topics are more material for some sectors: health and safety is more relevant to mining than banking, for instance. It also varies according to the maturity of the company in terms of its sustainability journey. Some companies are at the corporate donating and volunteering stage; others have integrated sustainability into their core business.
While the role of sustainability officers varies, in essence the job is about making the company fit for the long-term future in relation to environmental, social and governance issues. Ultimately, it’s about long-term value creation rather than just ethics. Sustainability is increasingly data-driven and focused on metrics and there is an increasing regulatory and compliance element, such as legislation on modern slavery or transparency. Market-driven changes such as CO2 prices are also important. And as Dell’s vice president of sustainability David Lear notes, forming partnerships is critical.
“A few years ago, we realised that to achieve our long-term sustainability goals, we really needed to rethink our entire ecosystem,” explains Lear. “We gathered insights from customers, suppliers, NGOs, governments and employees to establish a set of 21 goals across topics of environment, community and people for Dell to achieve by 2020. By setting those long-term goals, we sent signals to a lot of our supply chain partners and technology partners about where we wanted to go. That opened the door for some of them to jump in and say, “Hey, we can help you get there faster.”
No individual can hope to improve a company’s sustainability alone, not least because the numerous tasks associated with that goal span operations, investor relations, communications, compliance, finance and many other functions. “It is impossible to know everything that goes on in a large company around the world. Nor can I know everyone,” says Leon Wijnands, global head of sustainability at ING, who spent 25 years in client-facing banking roles before switching to sustainability six years ago. “100% of my job is therefore about interaction with others.”
Rather than sustainability being the business of a single person or department, all employees should take responsibility. “To deliver change, sustainability must be embedded in the business,” he says. “My role is to catalyse that change.” A large part of a CSO’s job is therefore about nurturing the right corporate culture.
To do that, ING relies on the intrinsic motivation and enthusiasm for the topic of its employees, says Wijnands. But it is important to have a formal structure to ensure that sustainability becomes a reality. “To drive change, you must first set a clear direction and then ensure that it is executed by installing governance,” he says. One way to do that is to set up a sustainability board to monitor progress. “But we’ve chosen to do it differently.”
At ING, sustainability is part of the management board’s regular monitoring while execution is the responsibility of the existing management team. For example, the chief operations officer is responsible for ING’s carbon emissions, and the shift to a green lending portfolio is the responsibility of the head of wholesale banking. This structure reflects an early decision not to have a separate sustainability strategy. “We only have one ING strategy – Think Forward – and sustainability is embedded into that,” says Wijnands.
“This structure does produce some challenges,” concedes Wijnands. As there isn’t a single coherent group focused solely on responsibility, it is more challenging to keep track of progress. “But the great advantage is that by embedding sustainability in the business, it means that decisions are made and executed within a business setting, which means they are much more likely to be followed through.”
Of course, companies not only have to determine a strategy to implement sustainable change but also carefully select a focus – the United Nations’ sustainable development goals cover 17 areas, ranging from eliminating hunger and gender equality to clean energy and climate action. After consulting with stakeholders internally and externally, ING decided to focus on two main topics: bringing about the low-carbon society through its lending portfolio; and enhancing self-reliance in society by empowering people to manage their money and futures more effectively.
“That doesn’t mean that we ignore other aspects of sustainability,” says Wijnands. “Indeed, we go beyond compliance and regulations in all areas. However, we’ve chosen to focus on those two areas because they are most relevant to our stakeholders and our business.”
A broadening role
Since he took the role, Wijnands says the profile of sustainability has soared. “Once there were just a few companies pushing the concept of sustainability,” he recalls. “Now regulators, customers, and other stakeholders have become driving forces and the sense of urgency has increased. No one asks ‘why should we do this?’ anymore. There is a clear business and moral case that almost everyone in the organisation accepts.”
The CSO role has also assumed greater strategic importance within many organisations. Once it was only about protecting the reputation of a company but it is now a driver for innovation, new business, growth and managing risks, according to Wijnands. However, paradoxically, the ultimate measure of success would be the closure of the sustainability function at ING. “The bank has no global head of costs or customer satisfaction – they are core parts of existing functions,” says Wijnands. “Once sustainability is fully integrated into the business, it will simply become business as usual.”
That end point seems quite distant, however. More immediately, many companies may need to decide how the CSO role will evolve as circular business models become more widespread. Wijnands believes the impact of the circular economy will depend on the type of company to an even greater extent than sustainability.
“In banking, the implications are not that significant,” notes Wijnands. “Circularity starts in the real economy rather than the financial economy. For manufacturing firms, it will be a profound change to decouple economic growth from resources.” What is relevant for banking and finance is that a switch to the circular economy means a big change for many clients’ business models. By moving from a sales-driven model to rental, for instance, there are major shifts on the balance sheet. Financial services firms will have to accommodate these and innovate around them.
For many companies, a move towards circularity will result in the expansion of the sustainability function: are there sufficient numbers of skilled people available? Wijnands says it is easy to find people who are enthusiastic about sustainability and want to work in the sustainability function but that it’s important to ensure complimentary skills and diversity.
“The demands of the role have changed over time,” explains Wijnands. “While we still have plenty of people with expert knowledge of human rights and environmental issues, our most recent hire was a PhD in behavioural economics. This is because we recognise the need to change behaviour.” ING observed that 30% of all emissions relate to real estate, and half of that is residential. From a banking perspective, it looks like it would make sense to develop a green mortgage product that offers a discount for the installation of solar panels, for example.
“But behavioural economics shows us that in many instances the adoption of greater sustainability is not primarily a financial decision; often people are overwhelmed by the complexity of choices and therefore simply decide to do nothing,” says Wijnands. “We have partnered with Vattenfall to develop an approach that helps clients to make complex choices in relation to sustainability – insights into consumer behaviour are critical.”
For CSOs, such ‘thinking outside the box’ seems certain to become a core element of the job in the coming years; only open-minded candidates need apply…