Climate change is real and extreme, and untimely climate events are becoming more and more of a pattern. Earlier in the year 2021, there was record snow in Madrid, Storm Cristoph in the UK, Cyclone Ana in Fiji, sandstorms in China, flooding in New South Wales of Australia, Cyclone Seroja in Perth, Australia, to name just a few.
These incidents across different continents this year have stunned weather scientists around the world with their suddenness and ferocity. They also had an ominous sense of timing to them. The Intergovernmental Panel on Climate Change (IPCC), under the aegis of the United Nations, released the Climate Change Report 2021 in August 2021. The report asserted that climate change was “widespread, rapid, and intensifying”. The report also placed the blame for this disaster unequivocally at the door of humans, and sounded a “code red for humanity”.
Large entities like governments and corporations have considerably more muscle and responsibility to enforce sustainable practices within their spheres of influence. They can find it easier to push for what is called a green economy, and which is defined as an economy whose stakeholders and participants engage in low carbon, resource efficient and socially inclusive activities. Such practices need not always be limited to heavy manufacturing industries with large factories only. Companies like Licious, Verizon, and Mastercard have also announced their commitment to sustainability. And how have they done it? By placing sustainability and responsible business growth at the center of business strategy and giving credibility to this effort by creating the executive role of the Chief Sustainability Officer (CSO).
The Chief Sustainability Officer (CSO)
The foundations for the introduction and evolution of the CSO role were laid almost two decades ago, with what this Forbes article called ESG – environmental, social, and governance – factors. The UN Secretary General invited 50 CEOs of financial institutions to find ways to embed ESG factors in the way investors view corporations and take investments decisions.
As these three factors became more and more important, it was no longer enough for an inward-looking resource to handle them within organisations. The job needed someone who would effectively engage with external stakeholders too. The rise of shareholder activism in the 21st century coincided with the increasing pressure to adhere to ESG norms. As this detailed 2018 report by the Luc Hoffmann Institute says, as many as 520 companies were subjected to demands by such activism in 2013, and this number increased to 758 in 2016. This led to the gradual institutionalisation of the response of the corporate world to the challenges our planet was facing – a commitment to walk the talk. These were some of the reasons that the CSO role has today become a C-suite role.
Who else is appointing CSO’s?
More and more companies are jumping on to the bandwagon. Since 2018, for example, some companies which appointed CSO’s for the first time were :
- Pepsico (beverages)
- Lafarge Holcim (building materials)
- Citigroup (banking and investment)
- Encina (Waste plastics to chemical solutions)
- Liberty Mutual (insurance)
- Ralph Lauren (fashion)
- AIG (insurance)
If we consider only the US, the number of CSO’s appointed increased from around 50 in 2018 to more than 90 in 2021. But the movement towards ESG (environmental, social, governmental) factors has been embraced globally by a number of corporations. In India, for example, CSO’s have been appointed across a wide spectrum of industries, and this list includes companies like the Aditya Birla Group, Dalmia Cement, Mahindra group, JSW group, Emaar MGF, and more. The writing is very clear on the wall. It is time for business entities to walk the talk. They need to stand up and be counted as part of the worldwide efforts to slow down or reverse the damaging effects of climate change.
What does a CSO do?
Seven years back, Harvard Business School Associate Professor George Serafeim co-authored a paper in which he tried to answer the question – “Chief Sustainability Officers: Who Are They and What Do They Do?“. From our experience of executive hiring for the last ten years, these are some of the responsibilities that we think a typical CSO carries:
1. Identify newer areas where the organization can take definitive steps towards ESG goals, and showcase its commitment to sustainability.
2. Find the sweet spots between these commitments and the business goals, so that neither is hampered, and provide strategic inputs to drive both sustainability goals and business goals concurrently.
3. Look outward to see how the world is responding to the real danger of climate change, and also look inward to see whether their organization is also responding adequately.
4. Keep track of all changes in applicable local, state, and federal laws which could impact the sustainability initiatives of the organization, and advise fellow executives accordingly.
5. Drive necessary training and sensitization activities throughout the year across locations and functions to make sustainability a way of life instead of only a nice slogan.
This list is not an exhaustive one, because the CSO function is being embraced by more and more organizations operating in diverse industries, necessitating slight tweaks in the job descriptions. Of course, water and energy use are important responsibilities of the CSO, but they are increasingly focussing on working conditions in their supply chain, ensuring workplace safety, and even investing research efforts into products (or services) that address environmental and social problems.
Meet the CSO
Let us take the example of two large organizations, and see how their CSO’s are leading the battle against climate change without losing their focus on the business goals.
Rise for Good – The Mahindra Group Case study
Most of us associate the Mahindra group only with rugged four wheelers and dependable tractors. But the group has an enviable range and depth of business interests which include construction equipment, aerospace, financing, real estate, steel, renewable energy, electric mobility, hospitality, information technology and many more. Given this wide spectrum of activities, it is run more like a loosely held federation of companies. However, sustainability is one of the few functions that is driven centrally for the entire group.
The Mahindra group has set itself a target of becoming carbon neutral by 2040, which means there will be no carbon dioxide emissions caused or influenced by Mahindra group companies by that date. This goal will be reached on the shoulders of four pillars – energy efficiency, renewable energy, electric mobility, and carbon offsetting. Getting such a huge conglomerate to align to this goal is not an easy task at all, but the journey is made easier by showcasing the business gains achieved.
One good example of this is the internal carbon pricing mechanism introduced in 2016. Mahindra levies $10 for every tonne of carbon emissions, which has pushed tenfold the budgets allocated for energy efficient projects. This is similar to the carbon tax of $35 per tonne of emissions in 2030 that the IMF has been suggesting for some time in order to encourage nations to adopt cheaper renewable options. There are smaller enterprise-wide initiatives like the use of magnetic induction, LED lighting technology, and waste heat recovery systems at its plants, which show a huge impact when one considers the large number of factories and establishments of this group. The efforts are not limited only to the factories of the Mahindra group. As far back as 2007, the Mahindra Group committed to planting a million trees every year as a visible carbon offset project. In the last 14 years, 17 million trees have now been planted.
There are two reasons for the commitment of carbon neutrality to look achievable by 2040. First, the group has not only set its carbon neutrality targets publicly, but also showcases their results on those parameters publicly. The Mahindra group has been reporting its emissions since 2008. Second, they have utilised the position of CSO to be the public face of these initiatives. It helps that one person drives this commitment across the organization and also engages with the outside world, instead of sustainability only being a nice sounding word used by executives and employees.
A Priceless Planet – The Mastercard case study
Sustainability conversations are no longer limited to large conglomerates with huge factories belching carbon laden smoke into the atmosphere. Mastercards approach to Sustainability challenges is a great example. Mastercard’s plastic cards are used by approximately a billion cardholders around the world. And this is the area where Mastercard has joined the climate change movement. They are broadly basing their efforts on four pillars – reduction of emissions, ensuring all offices are green buildings, committing to renewable energy, and focussed supplier engagement to ensure that the vendors too disclose their carbon scorecards and consciously reduce their carbon footprints.
The position of CSO is front and centre for these initiatives, and drives the company’s efforts to promote the use of recycled and bio-based materials in the manufacture of the credit cards of Mastercard. Mastercard has introduced the Priceless Planet initiative that aims at planting an unbelievable 100 million trees within 2025. It also aims to partner tree planting initiatives by offering loyalty schemes to further this initiative.
CSO skills
With the CSO becoming a role that many organizations are creating lately, let us examine the leadership competencies that this role broadly requires. There are several hats that a CSO must wear, in order to be truly effective in her role.
The rebel: First, the CSO needs to have the ability to question the status quo. It is not enough to just do that, if the CSO is to be taken seriously. There must also be the ability to offer fresh perspectives about the current situation, so that buy-in from other executives and later from employees is easier.
The facilitator: The second skill that a CSO needs to have is to be a good facilitator for difficult conversations. When sustainability goals are introduced in an organization, they are bound to impact some other actions of the firm. The CSO needs to be a good referee for fair allocation of scant resources.
The expert: A CSO would be effective if she has a good cross-functional understanding of technology and science, business profitability, compliance, and governance. The balanced view a CSO needs to have can happen only if the CSO has a thorough understanding of all these competing aspects.
The doer: Without doubt, a CSO needs to also have very strong execution skills for the strategies she formulates. Without this, her efforts would only remain words that are nice to hear. Since it is probable that the CSO might not start with a large team, it is imperative that a CSO is willing to get her hands dirty and get into the nitty-gritty to push through the sustainability projects across the organization.
The Influencer: Communication and influencing skills must be a strong suite for any CSO. This would be needed both externally and internally. A CSO needs to convey the organization’s point of view effectively to regulators, administrators, and the public at large. Then there is the need to push the sustainability agenda inside the organization, across levels.
The future of sustainability
The Climate Change report has served as a timely reminder that organizations and nations need to do more to make our planet a better place to live. The reinsurer Swiss Re predicts that the increasing instances of extreme weather conditions would increase property insurance premiums by almost $200 billion by 2040, and overall effect a drop in GDP by as much as 18% by 2050. The year 2021 has already provided several clear signals to humankind to stand up and do something to combat climate change. In business organizations, the office of the CSO will need to push this agenda. The momentum is already showing, but a lot more needs to be done, and with a sense of urgency. Irrespective of the size of the organization, their boards, investors, founders, and CEOs need to create an engine to drive their sustainability goals. As the CSO becomes increasingly indispensable to a firm’s bottom line, it may just be a matter of time before the job, like the chief financial officer or chief strategy officer, turns into a stepping stone to the apex of the C-suite.
About WalkWater Talent Advisors
We are a 10-year-old boutique executive search and talent advisory firm.WalkWater focusses on leadership hiring across the CEO, CXO and CXO minus 1 level. Today the firm is one of the fastest growing Executive Search firms in India. In the last 10 years, we have worked across sectors with 400+ clients where we have closed 700+ senior management searches and also completed 40+ bespoke talent advisory engagements. Over the years, we have emerged as a clear alternative to the global search firms and an equal in terms of industry expertise, client partnering, candidate connect and access. Our work has spanned large MNC and Indian Business houses and a whole array of start-ups / emerging companies across sectors.
By Rahul Shah,
Co-founder & Director,
Walkwater Talent Advisors