‘Put CSOs above other business lines’: boards given sustainability tips by peers
Directors and CSOs share success stories and lessons on integrating sustainability into businesses
Boards have been advised to ensure their Chief Sustainability Officers sit above all other business lines and merge ESG and sales targets as part of new recommendations.
Fourteen board members, CSOs and sustainability specialists shared their successes and failures for a report “to inspire other board members in implementing the sustainability transition in their organization”.
The document comes from four non-profits and industry bodies: Accountancy Europe, Chapter Zero, the European Confederation of Institutes of Internal Auditing and The European Confederation of Directors’ Associations.
Interviewees include the CSO of clearing house Euroclear; an independent director for Norwegian telecom firm Telenor Group; and the chairman of Cenergy Holdings’ audit committee.
They shared anonymised examples of instances in which their organisation’s solved challenges or learnt lessons about what didn’t work.
According to one interviewee, their company wasn’t advancing on its environmental and social goals “because the CSO was seen as just another line in their business line chains”.
After a while, the board moved the CSO up the corporate hierarchy, to sit above all other business lines and below the CEO.
“And it works now, because the CSO is no longer on the same level as the business lines, but at a higher level, and can influence and work together with all the other business lines.”
The company consequently became more able to achieve its sustainability targets, noted the report.
Another interviewee pointed out the value of CSOs being involved in sales meetings and other events in which KPIs and targets are discussed, to ensure they don’t conflict with sustainability goals.
“You see a lot of contradictions if you split traditional KPIs from ESG KPIs, so we embedded ESG KPIs in the sales KPIs,” he added. “When you link them and set the targets, this is where the real discussion starts.”
Training and expertise was another issue flagged by respondents, who said that board members should identify sustainability topics that are material to the success of the company and tap industry bodies, NGOs and internal experts to ensure they are educated on these issues.
One interviewee said companies “need resident climate expertise in the audit committee” to better understand the impacts of climate change on financial performance, asset valuations and credit risk, rather than seeing it solely as a CSR function.
In one instance, a company had designated “several” of its board members as the go-betweens between management and the board on ESG issues.
“One lesson learned was that these volunteers were not sufficiently specialised in ESG matters,” said a respondent, meaning they were unable to adequately understand and ‘translate’ to the board.
“Another lesson was that they did not find the right level of communication with the management team. They wanted to obtained detailed information and files relating to ESG matters. To get it, they were disturbing the management team too often.”
Eventually, the board concluded that this intermediary approach was ineffective, and invited management to present updates on ESG issues directly to the entire board instead.
For the full report, see here.