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October 31, 2024
BSR’s recent report, The CSO at a Crossroads: Three Paths Forward for Sustainability Leaders, drew on interviews with more than 30 chief sustainability officers (CSOs) to argue that we are at a crucial moment to reassert an ambitious vision for the CSO role.
After a period where CSOs focused (understandably) on reactivity and regulation, it is time to recognize the urgency and scale of global challenges and their implications for business. We emphasized the unique capabilities of the CSO in helping the company navigate external global developments and stakeholder interests with an eye on strategy, risks, and opportunities.
So how can CSOs steer down the more ambitious paths for sustainability leadership?
Here are seven ways sustainability leaders can reassert ambition in transforming companies, economies, and societies:
- Use futures, foresight, and scenarios to reframe the time horizon for ambition. Corporate approaches that emphasize reactivity and compliance are doomed to deliver incremental improvements and miss the long-term changes that affect business and society. Companies can recognize the benefits of more resilient and ambitious strategies by weighing, “What developments might shape our business and operating environment over the next 10 years, and what actions should we take to prepare for them?” BSR’s 2018 report, Doing Business in 2030, encouraged leaders to contemplate scenarios based on the hyper-politicization of business and sustainability, dramatic geopolitical fragmentation, breakthroughs in AI, and a global public health crisis. The 2024 report, Between Two Worlds: Sustainable Business in the Turbulent Transition, updates futures thinking to enable Boards and senior executives to focus on longer-term considerations.
- Focus on the top few areas with the most strategic importance and impact. To date, sustainability strategy has too often been an exercise in breadth and bundling—covering a range of topics and aggregating them into themes. This may have made sense in an era when companies were in the early stages of understanding their impacts. With foundational double materiality assessments in place, CSOs can pursue more ambitious impact agendas by identifying and investing in a select few strategic priorities. These priorities will need to be tailored for each company and may be linked to the specific business model (US private sector on EU regulations). As Robert G. Eccles and BSR alumna Alison Taylor noted, “The CSO role is finally becoming strategic, if you define strategy as the art of choosing what not to do. Today, CSOs help identify and direct attention to the ESG issues that have a substantial impact on an organization’s financial performance and risk profile. This approach aligns with broader corporate strategy-making, as it helps organizations focus on what matters most to long-term value creation.”
- Shift from disclosure to strategy; from assessment to action. Recent regulations have launched a scramble to strengthen corporate governance, risk assessments, and disclosures on sustainability. Those are worthwhile developments, but ultimately meaningless unless they serve as the basis for strategy, action, and impact. Companies that are investing so much now in due diligence and compliance should begin to focus more on the resulting actions that will yield meaningful improvements in real world risk, opportunities, and impacts. You can’t simply “CSRD away” your climate risk. A focus on collective action and collaboration within and across sectors can also avoid duplication and better align efforts towards more efficient and impactful change.
- Rethink business models to address the fundamental tensions among corporate interests, society, and the environment. Business and economic models based on indefinite growth and unmanaged externalities are already running up against environmental, social, and political limits. Those limits will threaten many companies, such as those that depend on cheap natural resources, endless disposable plastics, unfettered trade, fragile logistics networks, low wage labor, and use of personal data. These limitations may manifest in response to commitments and regulations. For example, incremental action against a context of ongoing growth will not suffice to help most companies achieve their public, investor-facing commitments to Net Zero and Science-Based Targets. Additionally, the European Sustainability Reporting Standards specifically call for disclosures to account for the impacts of a company’s business model. Moreover, companies have an opportunity to build more ambitious, resilient strategies by examining and innovating in how they create, deliver, and capture value amid changing environmental and social dynamics. Areas for exploration might include designing products/services for sustainability and human rights, development of circular or service-based business models, expanded employee ownership, and more inclusive governance models. Focusing on business models puts sustainability at the center of major business decisions—where to build a factory, which technologies to adopt, mergers and acquisitions. Boards and executives will have to make such business decisions within the wider societal context.
- Activate boards and executives. Corporate leaders have moved rapidly up the maturity curve on sustainability, particularly in their oversight of disclosures and compliance. It will be vital to shift boards and executives to more active roles in grappling with the strategic impacts, risks, and opportunities of sustainability.
- Elevate expertise and stakeholder voices. Senior executives and board directors rarely bring specific expertise in areas of vital sustainability importance such as climate change, human rights, and responsible AI. They also rarely come from vulnerable stakeholder groups. Important efforts are underway to upskill and diversify corporate leaders, though we can’t expect solutions to be quick or comprehensive. To access expertise, navigate complexity, and incorporate more diverse stakeholder viewpoints, boards and executives will benefit from ongoing platforms to tap external views. That might come through building partnerships, establishing external advisory councils, or leveraging industry wide stakeholder engagement. It might also include more significant governance changes such as mechanisms for employees to serve on boards, or granting a board seat to nature.
- Engage in public policy; strengthen geopolitical capabilities. The call for companies to engage more thoughtfully in public policy is not new, but it is more important than ever given political backlash and reluctance to take on the major challenges that social and environmental risks pose to economic and societal well-being, and the fracturing of global cooperation on issues like climate change, trade, and peace. Companies will benefit from aligning sustainability and public affairs to promote shared priorities and boost credibility. More importantly, they can enhance sustainable business leadership by using that base of credibility to encourage rational policies that manage systemic risks and promote positive, sustainable transformation in the business operating environment. While business associations have often focused on preventing regulation and tax policy, those associations could be valuable forums to amplify the collective voice of specific industries to advocate for a strengthened enabling environment for sustainable business.
BSR plans to use these preliminary ideas as a starting point to engage members in the coming months, and we welcome your solutions, critiques, and quandaries.
It is especially crucial that these conversations reflect the challenging context of the present and the global imperatives of the future. If CSOs are indeed at a crossroads, it is time to race along a path of integration, ambition, and transformation. We look forward to bringing together CSOs, CEOs, and Board Directors to further discuss the evolving role of sustainability leadership.
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