Chief Sustainability Officers Have More Impact When They’re Aligned To The CEO

Republished by Harvard Law School Forum on Corporate Governance..

Businesses are more likely to hit organizational ESG targets when their sustainability leader reports directly to a CEO with a demonstrated commitment to sustainability.

Many organizations find it challenging to know where to start when adding a new Chief Sustainability Officer (CSO) role. Our recommendation is to provide them with a direct line to the CEO.

Russell Reynolds Associates’ (RRA) 2022 survey of more than 50 global sustainability leaders found that when CSOs report directly to the CEO, they are more likely to say their company is on track to hit organizational ESG targets than those who report to other business leaders.

In fact, the survey showed reporting structure is the primary differentiator of an organization’s likelihood to meet their ESG targets. Other factors, such as P&L ownership, company tenure, or past sustainability experience are far less indicative of sustainability performance.

CSOs who report to CEOs are 50% more likely to say their company is on track to meet their ESG targets than those at organizations with other reporting structures.

The rise of the “Empowered CSO”

Our analysis shows that just 34% of CSOs report to the CEO today. The vast majority report to other C-level executives or management below.

We call CSOs who report to CEOs “Empowered CSOs.” Why? Because they are more likely to operate under conditions that enable them to accelerate the change needed in their organization—whether that’s gaining access to opportunities that will help them as a leader or to information needed to make good decisions.

Being closer to leadership also enables Empowered CSOs to better collaborate and influence across the C-suite, bringing a sustainability lens to every aspect of the management of the business. This doesn’t just set them up for success personally; it also makes it more likely that the organization will hit its ESG targets.

Empowered CSOs are differentiated from those with other reporting structures in several ways:

Ecosystem of the Empowered CSO

% of Empowered CSOs compared to CSOs with other reporting structures

Source: RRA 2022 Sustainability Leaders Survey, Base n = 56 sustainability leaders

What This Means For Leadership

Simply appointing a CSO is not enough to set and meet impactful sustainability goals. Adoption of the sustainability agenda starts at the top, requiring the CEO and the board to be fully aligned on making a sustainability transformation a priority.

While alignment to the CEO is just one aspect of designing a CSO role, ensuring that the most effective person is in the role—with the right skills and experiences to elevate organizational sustainability strategy—is also crucial. Here are some important points to keep in mind:

• Position CSOs as close as possible to the center of core decision-making. Best-in-class CSOs are multi-level systems thinkers, able to identify risks and opportunities other leaders may miss. These are business value creation roles and need to report to leaders at the top. For the CSO function to contribute as much value as possible, they must have the opportunity to bring a sustainability lens to all aspects of the organization.
• Ensure the CEO and board are aligned around the importance and potential of sustainability. Without visible and authentic buy-in from the top, a CSO’s impact will be constrained. Both should regularly review progress against tangible, science-based sustainability targets.
• Provide the CSO with opportunities to engage with the board and other key stakeholders. The CEO should look to the CSO as their partner in building support for the sustainability strategy across the organization, and as another “face” of the sustainability effort when engaging with investors and other stakeholders.

Empowering the CSO role by aligning them to the CEO, embracing a greater scope, and setting more multi-faceted ESG targets is a powerful way to accelerate your organization’s sustainability action plan.

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