Chief Operating Officer (COO)
The COOs can see the company through a different lens, balancing the work on managing ESG risk against the day-to-day operations of the business. They manage business operations that impact ESG and can identify gaps that may exist to ensure that both facets of the business function effectively and are aligned to the ESG priorities of the organization. They can assess whether employees need to commute daily (emissions) to come into the office (real estate building carbon emissions). But they also play a role in contributing, understanding and managing ESG risk strategies related to the physical buildings, carbon emissions, greenhouse gas emissions and other factors.
The COO can also explore decarbonization opportunities:
Usage of hydrogen and other low-carbon power sources
Investment in research and development across the physical infrastructure lifecycle
Advocating net-zero targets to building owners and developers
Looking at CO2 emissions from suppliers
Evaluating fair trade practices for all upstream suppliers
Studying water stewardship within the value chain
What are the top 3 things the COO should activate immediately?
What are the COO’s key considerations with respect to ESG risk?
Through an established procurement function, a third-party risk management program and due diligence process should be leveraged so the organization can ensure collaboration across its value chain to reduce emissions, deforestation efforts (as an example) and ensure factors under the social domain are aligned to the organization. For example, for an organization in the apparel sector, having a traceable sourcing policy publicly listed on the company website will define which areas the company is sourcing materials and labor from based on social and environmental factors. COOs should also keep in mind, however, that a traceable sourcing policy is only one part of the equation. A sustainable sourcing target/policy, a monitoring and auditing policy and transparency into the audit result are also crucial.
Related case study
Large media and entertainment company:
▉ An $18b media and entertainment company needed to deliver on commitments to sustainability and aspirational goals to be carbon and water neutral, as well as send zero waste to a landfill. They also wanted to create partnerships within their supply chain to support the company’s overall sustainability goals. The EY organization assessed their supply chain impacts as well as services that they had purchased, and co-designed supplier collaboration projects aligned with the company’s goals.
To take the supply chain sourcing model a step further in terms of the social and environmental impacts, the company can use innovative technologies such as ForestMapper, a map that visually represents endangered forests on a global scale and helps companies transition to more sustainable fiber supply chains to identify areas of potential risk in sourcing.
If the organization does not have a separate CCO to monitor and manage compliance activities, the COO needs to be vigilant about keeping up with new ESG regulatory reporting requirements and guidelines as they change to make sure the company remains in compliance. With new ESG commitments, the COO needs to ensure the existing compliance systems, processes and infrastructure are appropriate and effective. The company can leverage both internal and third-party auditing programs to ensure compliance outside of its organization. Working through the value chain, COOs should work internally, as well as with external partners to drive toward the same goal. With the multiple measurements, reporting frameworks for ESG risks, the COO can play a key role in supporting the organization with harmonizing a common ESG risk taxonomy.