Reinventing the Corporate Sustainability Function

(Originally published in Spanish on LinkedIn on February 20th, 2024: Reinventando la Función de Sostenibilidad Corporativa | LinkedIn)

 Nearly 25 years ago, I had the privilege of establishing one of the first Corporate Social Responsibility departments within a company in Peru. At that time, it seemed innovative. Much has changed since then, and executive positions in Corporate Sustainability (yes, Corporate Social Responsibility is dead) are now commonplace. However, what remains uncommon is the integration of Sustainability and Strategy—even Marketing and Organizational Transformation—within a single role. A role that should be part of the C-suite.

 Below, I outline three reasons why I am convinced that the Chief Sustainability Officer role must be reinvented.

Technical Aspects Are Mainstream. That's Not What the CEO Needs

Today, there are many experts or specialized consulting firms in materiality analysis, GRI or SASB reporting standards, footprint measurement, and decarbonization roadmaps, among other things. All of this is already mainstream. But Corporate Sustainability is much more. Once considered one element among others in corporate management, it is now an essential part of a new way of doing business and a crucial element of corporate strategies.

Operationalizing this new way of doing business requires much more than a functional vision. The traditional role of the Chief Sustainability Officer (CSO), which focuses on the technical aspects that are already mainstream, needs to be revised. CEOs need a transformational leader in their leadership teams who drives change holistically to create exponential value. They need a strategist who can integrate Sustainability into business decisions and find synergies between the internal and external, the commercial and non-commercial, and the financial and non-financial aspects of business management.

In a changing world, CSOs must reinvent themselves as innovators of business models that anticipate society's new expectations and industry disruptions.

The Business of Sustainability

If the role of the CSO in the C-suite is to comply with increasingly stringent regulations regarding ESG, then significant value is being left on the table. That is the reactive approach.

On the contrary, a proactive approach begins with a growth mindset, recognizing that Sustainability means business. According to Bloomberg Intelligence, global ESG assets will exceed US$53 trillion by 2025, representing more than 1/3 of the projected total assets under management. Companies, cities, and countries must meet aggressive sustainability goals, particularly regarding decarbonization and climate change. They will need expert assistance, as well as capital. For example, the International Energy Agency (IEA) estimates that to achieve net-zero emissions by 2050, annual investment in clean energy worldwide will need to triple by 2030 to reach around $4 trillion. In other words, there is a Sustainability Market.

A reinvented CSO understands that a reactive approach only ensures the company's relevance in the market. On the other hand, a growth approach will set the company apart from the competition, creating exponential value through a unique business response to social or environmental problems. Therefore, a CSO is often also a Chief Marketing and Innovation Officer.

Companies Need to Evolve

Peter Drucker once said that culture eats strategy for breakfast. I believe Sustainability does it for dinner. That is, if the business strategy (or even the corporate strategy) fails to create value for shareholders and stakeholders, the company will ultimately be out of the market.

CEOs know this. But so far, mainstream solutions have been all they have at hand to solve this problem, which is precisely why the term ESG has recently been criticized so much for its generalist (and even absolutist) nature.

A company's C-suite needs a leader with business knowledge, strategic thinking, and inspiring leadership skills to drive change. If companies must reinvent themselves and evolve, the new CSO must also be a Chief Transformation Officer.

I am not talking about a traditional transformation focused on seeking efficiencies or adopting new operational models or technologies. I am speaking more about a profound transformation that starts with Corporate Purpose, goes through the integration of Business and Sustainability Strategies, and culminates in adopting New Business Models that profitably capture opportunities in a changing world.

However, only some companies know how to address this imperative evolution. From large multinationals with ambitious goals who probably still need to learn how to fully meet them in their entire value chain to local, smaller companies, every transformation needs a structured process orchestrated by a new member that sits at the highest level of business leadership.

The redefined Chief Sustainability Officer embodies versatility, assuming diverse roles under different titles. Yet, their fundamental essence lies in wielding pivotal competencies as catalysts for transformative change and as visionary leaders. In essence, they epitomize the spirit of corporate entrepreneurship.