3 minute read 1 Apr 2022
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How CSOs are fast joining the ranks of CFOs and COOs to drive business value and sustainable impact

By Mathew Nelson

EY Oceania Chief Sustainability Officer

Leading a purpose-driven team that shares a common passion for creating positive impact. Workplace diversity and equality advocate. Engineer. Father of two boys. Australian Football League fan.

3 minute read 1 Apr 2022
In brief
  • C-suites should expand to include the Chief Sustainability Officer (CSO) to ensure Environmental, Social and Governance (ESG) is embedded in day-to-day decisions
  • Executive CSOs will require new capabilities, including a deep knowledge of business strategy, operations, levers and pressures
  • Sustainability leaders should prepare now to step up into a more strategic role

Sustainability managers are already engaging with critical stakeholders across their organisations – and presenting to boards and executive teams. But now their role is shifting gears. Rather than simply being responsible for developing and implementing sustainability strategies, CSOs are being held accountable for an organisation’s ESG performance, right across the value chain.

Sustainability-related topics like climate change are creating existential threats to companies that don’t or won’t respond, and companies are re-evaluating their organisational strategies. In future, as a matter of course, strategy development will give the same emphasis to sustainability as it does to growth.

A CSO should be part of the executive

If CSOs are to be held accountable for ESG outcomes and involved in mainstream strategy development, it follows that they need to be embedded in decision making across an organisation – and elevated to the executive leadership team.

If we acknowledge that sustainability is now core to future organisational performance, then the CSO is critical in providing a unique point of view on day-to-day business decisions. They must be the voice of all key stakeholders, helping to determine what will and won’t impact long-term value creation and ensure the organisation’s sustainability goals are at the forefront of the executive agenda.

Because, when the voice of the CSO is not heard, all too often sustainability goals and activities can be sacrificed for more immediate operational priorities.

In this regard, it’s important to acknowledge that incidental decision-making is sometimes as important as strategic decisions. This is the space that CSOs are currently often not present for or involved in – and this needs to change.

Already, we have CFOs to ensure every decision considers the finance implications – and COOs to ensure decisions consider the operational implications. Now CSOs need to be there to ensure every decision also considers the ESG implications.

How should CSOs prepare for this change?

CSOs come from a wide variety of backgrounds. Some with deep sustainability credentials, others with commercial, financial or legal experience. CSOs joining the executive leadership team will need to understand where their strengths lie and establish what their next wave of knowledge should be.

Those with a more commercial background will need to develop a deep understanding of the sustainability issues impacting their organisations so they can bring an outside view of emerging ESG trends to the executive table. They also need to engage directly with stakeholders to get a sense of what is important to them.

Whereas sustainability professionals will have to get further into the business and understand the imperatives for the board, CEO, CFO and COO. While a sustainability manager can get away with a working understanding of commercial realities, a C-suite role requires candidates first and foremost to understand the business.

An executive CSO needs a commercial mindset that enables them to add value to every part of their organisation. That means understanding:

  • What are the critical success factors that will enable the business to achieve its strategic goals?
  • What is the business agenda and how is it operationalised?
  • What’s working well – and what’s not?
  • Where are the pressure points and commercial challenges?

If sustainability is embedded in strategy – do we need a CSO?

The sustainability world has often debated whether an organisation needs a separate strategy if the business strategy has truly embraced sustainability? Similarly, some are asking whether a CSO is even necessary if sustainability is embedded into the organisation.

The answer can be found in comparing a CSO’s role to the way in which the CFO and finance function work.

Finance is embedded in almost everything a large organisation does. Budgets, reports, sales and costs are fundamental to day-to-day roles and decision making. But the finance function is still a critical component of the way the business operates. The embedded nature of finance makes the role of the CFO and the finance function more necessary – not less.

The role of the sustainability function and the CSO are similar. Once sustainability is embedded into everything the business does, the CSO and the sustainability function will be critical to ensure this continues to be the case and the goals of the organisation are dynamic enough to meet shifting stakeholder demands.

What should the sustainability function be responsible for?

As CSOs join the C-suite, where should their responsibilities lie? To date, many sustainability functions have been tasked with related elements touching the ESG portfolio: nonfinancial reporting, community investment, advocacy, lobbying and even public positioning and branding.

Now the CSO is moving into a more senior strategic role, they should predominantly focus on embedding sustainability into strategy and ESG stakeholder management. Other tasks could usefully be handed over: nonfinancial reporting to finance, advocacy and lobbying to corporate or government affairs, or branding to the marketing department. But this should be determined based on the specific needs of the organisation and will likely be very different in different organisations.

Clearing their desks to focus on priority areas is essential. CSOs will be at the forefront of shaping the organisational transformation needed to achieve a sustainable and successful future. They need the time and thinking space to shape a vision that will mobilise passion and purpose as organisations internalise sustainability as a driving force for all their endeavors.  

Summary

The role of the CSO is becoming increasingly important and should be elevated to an executive position to create maximum impact. To succeed in the C-suite, commercial and business understanding will be essential capabilities. CSOs need to prepare to step into a more strategic role with greater accountability, responsibility and influence.

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About this article

By Mathew Nelson

EY Oceania Chief Sustainability Officer

Leading a purpose-driven team that shares a common passion for creating positive impact. Workplace diversity and equality advocate. Engineer. Father of two boys. Australian Football League fan.