Taking The Lead On Sustainability In The Corporate World

Dedicated cross-functional teams that report to the CEO have the most impact

As the awareness of environmental, social, and governance (ESG) concerns rises, many companies are rethinking their patterns and past behavior. The change is being driven from different angles: society, legislation, customers, capital markets and investors, employees, and progressive top managers.

Depending upon their corporate values and the intensity of their environmental or social impact, some leaders have already created dedicated teams to tackle the challenges of ESG. The focus for some currently lies on the company’s own impact, while others have begun implementing changes along the supply chain. Some focus on smaller quick wins; others approach the topic from a strategic angle and challenge their business models.

It makes sense to implement sustainability roles for most companies, not only because of external pressure or an act of goodwill. With the right people onboard, Sustainability Managers can save costs, increase brand awareness, support external capital investments, help position the company as an employer of choice (especially for next-gen recruitments), and substantially reduce corporate risks.

The Covid-19 pandemic has shown that companies with a stronger focus on ESG outperform those with fewer ambitions¹. Interestingly, this also applies to organic food producers in contrast with conventional ones. One Sustainability Manager we interviewed gave a vivid example of a quick win generated through ESG efforts: The company has a large delivery fleet producing a high amount of fuel costs. The sustainability team set up and realized a driver training program with an investment of 50,000 euros. This led to a return on investment of 500,000 euros in the first year alone, in addition reducing the company’s CO2 footprint.

Companies who already have sustainability heads or Managers in place have decided for different setups. At chemical and pharmaceutical companies, sustainability teams often report to Operations. At other companies, the reporting line goes to Marketing/Communications, Corporate Strategy, a Board Member, or directly to the CEO. A prominent German example is Siemens, where Judith Wiese as a Board Member combines the responsibility for HR and sustainability. Meanwhile, for the likes of manufacturing companies or those that are highly dependent upon a range of different material suppliers, HR may not be the best reporting line as it has a limited impact on procedures and decisions in Operations.

Headwinds coming from other parts of the organization can significantly slow or hinder sustainability efforts. Therefore, it makes a huge difference to whom and especially to which level sustainability is reporting. Without the clear backing of a CEO, the impact of a sustainability head is doomed to be limited. Generally, reporting to a supportive CEO is essential to achieving a broad change across the organization. This is why certain companies have implemented dedicated sustainability teams as a staff function under the CEO. However, if it’s set up as silo role, the penetrative power is again limited. Companies are thus well advised to install cross-functional project teams that support the often necessary mindset shift in the different departments. A good reporting line would either be a Head of Sustainability who reports to the CEO or a Steering Committee that includes the CEO.

Diverse talks with Sustainability Managers have given us a profound overview of their tasks, reporting lines, personalities, backgrounds, and achievements. We at Stanton Chase are ready to support your considerations on sustainability recruitments and help you take the next steps toward implementing impactful sustainability initiatives.

About the Author:

Christian Ehl is a Partner at the Düsseldorf office of Stanton Chase.

¹  See The impact of ESG and corporate culture on company performance | BusinessFeed (cornell.edu) and Sustainable Equity Funds Outperform Traditional Peers in 2020 | Morningstar