Sustainability Execs Moving up the Ladder

By Tilde Herrera
Published March 12, 2008

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Does your company have a chief sustainability officer? Do you think it needs one?

For more and more companies, the answer is yes. That's according to Terry Chuah, a principal with the recruitment firm Heidrick & Struggles. The company recently released a white paper, "The Emergence of the Chief Sustainability Officer," which details the growing prominence of this new brand of top-level executive charged with thinking about sustainability strategically.

Terry recently joined GreenBiz Radio to give us a primer on what it takes to be a chief sustainability officer, or CSO, and the factors that are driving this demand.

Tilde Herrera: Would you please start by giving us a little background on you and your company?

Terry Chuah: Heidrick & Struggles is one of the world's largest global executive search firms. We do senior level executive recruitment for our clients across the whole spectrum of companies. So we do work for Blue Chip companies through to private equity companies through to early stage companies, and we cover all industries. I'm a partner with the firm based in our Menlo Park (Calif.) office. I am one of four global leaders of our alternative and renewable energy practice.

TH: So tell us a little bit about this trend your company has seen involving the rise of the chief sustainability officer.

TC: One of the most interesting trends that we've observed in the marketplace is the increasing importance of sustainability, generally known in the market as green. There are concerns emerging everywhere that affect the way that the companies should look at competition and affect the way that they should look at their product, and how they deliver their products and services in the marketplace.

Associated with that is the response that companies have these days, one of which is to increasingly appoint senior executives who are responsible for sustainability. That we have seen in the marketplace and across all of the industry sectors.

TH: How would you describe this position?

TC: The chief sustainability officer is somebody who takes a particular concern and thinks about the issues that affect a company. Now what we're seeing in the marketplace right now are executives of various levels. You see them at the VP level. Sometimes you see them at the SVP level and sometimes you see them at the director level.

So there is no standard in the marketplace right now, but what we are seeing is that increasingly more and more roles are being appointed that have as part of its responsibility one aspect or another of sustainability.

So for instance, you could have some roles that are particularly concerned about the usage of energy and power within a particular company. You can also have roles that are more concerned about the reporting of a company's carbon footprint, for instance.

What we are starting to see now though is companies and directors thinking more seriously about sustainability as a strategy issue. And what that means is that we're starting to see companies think about appointing chief sustainability officers at the most senior level.

TH: So, it sounds like this position is sort of an extension of what is usually termed as a chief of environmental, health and safety.

TC: Actually it goes beyond that. Depending on which industry you're in, you already have typically VPs or SVPs of occupational health and safety, especially in industries that are capital intensive or where there's a particular level of regulation that requires for a company to have, you know, somebody in that role. So, therefore the obvious would be in the mining and resources sector where there are regulations that companies need to meet.

So if you look for instance at the petrochemical industry, that's another example where occupational health and safety is very critical in terms of compliance with regulations for these companies. So what we are talking about now is something that goes beyond occupational or environmental health and safety.

What we are talking about now is nothing less than the emergence of what we used to see. Twenty years ago, we started to see the emergence of the chief information officer. About 15 years ago, we started to see the emergence of the chief supply chain officer.

In a similar way because sustainability is becoming an increasingly important strategic issue, CEOs are now thinking about appointing executives that report directly to them because of the importance of sustainability as an issue that affects the company. Not just in terms of its every day operations, but also the extent to which it affects its competitiveness relative to other places in the marketplace that may have products that are more attractive to consumers in response to changing consumers trends.

Increasingly consumers are concerned about climate change and are concerned about the extent to which they, through their buying choices, can make a difference to the environment. Because of these sorts of changes, we are now seeing a change in the way that companies think of the importance of sustainability and how, as an organization, they should respond accordingly.

TH: Let's take a step back and talk about the evolution of this position. What were the drivers behind it and what parts of the globe were showing signs of this evolution first?

TC: Well, this has to do with the extent to which the public has become concerned with issues of climate change. That has been developing over the years but I think perhaps more so over the last two or three years. This started a little bit earlier in Europe because of the way that social trends developed, particularly in Germany.

However, you could look at North America: This has been developing over the last two or three years in particular, but you know it has been driven home from the viewpoint of companies that have had no choice but to respond to this.

So, for instance, if you are a supplier to Wal-Mart and you know if Wal-Mart requires that you actually understand what your carbon footprint is as a company supplying to them, and that you need to demonstrate a commitment to reducing your carbon footprint as a company, then you will do so. And because of trends like these, because of market forces and market factors, we are starting to see a lot of companies respond accordingly.

Sometimes it is in response to a customer requiring you to do so. Sometimes it's in response to your consumers and your customers requiring certain characteristics and certain performance in your products.

So from a whole range of different factors, these have all combined to push companies across a range of industries to what's becoming much more conscious about sustainable performance.

TH: What sort of training or experience are companies looking for in a potential chief sustainability officer?

TC: By definition, there is a shortage of people with the relevant skill sets to be able to effectively play the role of a chief sustainability officer at the highest level in a company.

This is a role that will require not only domain expertise in terms of knowledge of energy efficiency, in terms of how power is consumed across the value chain. But it also requires somebody who understands the business of a company from a holistic sense. So, ultimately what you need is somebody who not only understands the fundamentals of a company's business, but also somebody who actually has very strong strategic reasoning abilities.

So, you need to be able to see ahead three years, five years (or) seven years in terms of how consumer trends are changing, in terms of how competitors are responding, in terms of how your suppliers will be able to deliver to you and so forth. And so, ultimately though, all of those things you need but what makes the difference in terms of the effectiveness of a chief sustainability officer is somebody who has change leadership abilities.

In other words, (it is) somebody who understands how to move a company forward. That will involve a lot of stakeholder management across different functions in their company because by definition, this is cross functional, and also being able to interact with the CEO, being able to interact with the board because now you're talking about issues that affect the company and could require a fundamental re-look in terms of how a company designs its products and how a company goes to market.

TH: And how do you see this demand changing over the next five years?

TC: I think the reality is that the requirement for companies to take sustainability as a key strategic issue is not going to go away. Sometimes there is a rush to wanting to look green but you know that will subside when the dust settles. What doesn't change is that the market will remain very competitive. What that means is that companies will need to deal with this issue going forward.

So the demand for people who are able to think strategically, able to develop strategies and response and be able to help implement those strategies in a company will only increase. So therefore, we have seen for instance situations where the demand for people with special skills like this have been such that you've seen a doubling of salaries almost overnight because of the demands for these sorts of skills in the market.

TH: Can you give some examples of CSOs that have been very successful or some of the early companies who maybe implemented a CSO position?

TC: Sure. The two best examples of companies that appointed chief sustainability officers (early) will be Dupont and Dow Chemical. These are two companies that obviously operate in the petrochemical area, and also two companies for which the consumption of energy is very critical to their cost position. So for them, you know it actually only makes sense.

Now those are the two companies that appointed CSOs very early. Now for them, obviously, it's also not just about being cost competitive by trying to drive down the use of energy but also for compliance issues.

Now in more recent times, we have seen more companies appoint CSOs -- sometimes not necessarily at the direct report level to the CEO but variously at VP levels. And so for instance now, we have seen Wal-Mart appoint an SVP of sustainability. Even Google has a chief sustainability officer even though this is at I guess a few levels down in the organization.

So whether you’re looking at the petrochemical sector, whether you’re looking at the retail or consumer sector or in technology, increasingly companies are appointing managers and executives that have a sustainability function.

TH: Now you touched on this earlier but I was hoping that you could elaborate and talk about the types of companies that would benefit the most from having a CSO on board in terms of size and/or sector?

TC: Any company can benefit from thinking about the issue in a way that is fundamental and in a way that is important to how they’re able to compete today and going forward. So therefore, it is not so much a question of either size or stage of development.

Sustainability is important, for instance, in the consumer sector where branding is particularly important. So, if you think about sustainability over and above the need to be competitive operationally and the need to be able to provide a product or service that the market wants and for you to be competitive with.

Companies, increasingly, need to think about sustainability in terms of it being perceived as an employer of choice. In other words, if you are like a Google, for instance, where you are not only seen to be active in championing climate change issues but also use renewal energy and provide green buildings and healthy buildings for employees, you are being seen as an employer of choice and therefore, in the war for talent, young people would want to work for you.

So therefore, over and above very fundamental business issues, there’s also an increasing need for companies to deal with sustainability in a way that allows for them to be competitive in terms of attracting the kind of talent that they would want.

You also have an interesting aspect to sustainability these days whereby if, for instance, you’re a bank and you run a call center. If you house your people in a green building and generally, that is a building that has more fresh air, it’s a cleaner environment and has more lighting, what you end up doing is actually improving the productivity of your workers.

So, therefore, you’re starting to see sustainability come through in very different sorts of ways and in very fundamental ways that affect your workers and the extent to which you’re able to retain -- or at least attract and then retain -- the talent that you want.

TH: Are there any other lessons that business owners should take away from this discussion?

TC: At all levels in any organization, there is a need to be aware of what trends are happening in the market relative to sustainability.

So, some of the issues that a CEO needs to think about were discussed a little bit earlier. But from the viewpoint of a board, the board also needs to be mindful about sustainability for all of the operational reasons. But importantly there is an increasing realization that the best companies that that have good sustainable practices and strategies are also the ones that have the highest performance in terms of return to shareholders. And the reason for that is that the companies that actually do sustainability well are also the ones that are well managed, who think about the issues that they need to deal with as a company that then translate into higher financial performance.

Now that is something that boards of directors need to be mindful of. In other words, they then need to be asking a set of questions about whether or not their company is moving in the right direction in terms of all of the questions that the issues of climate change bring up.

TH: Thank you so much for being here today.

TC: It’s my pleasure. Thank you.

Sustainability Execs Moving up the Ladder

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