This story first appeared on CPA Canada’s online news site.
This rapidly growing role spans every area of an organization, from corporate strategy to disclosure.
As organizations work toward becoming net zero and meeting the requirements of the Paris Agreement, jobs that help foster corporate sustainability are becoming more common, especially in the financial sector.
One such position is the chief sustainability officer (CSO). This C-suite role is outwardly and inwardly focused—working to fulfill the needs within the organization to meet KPIs, as well as the external requirements of stakeholders and investors.
Here are three reasons why organizations may benefit from bringing a CSO on board.
1) KEEP UP WITH EXTERNAL CHALLENGES
A report by Deloitte has labelled the CSO as the “sense-maker in chief.” Main responsibilities include reviewing external influences and converting that information into strategic behaviours for the company, as well as delivering on environmental, social and governance (ESG) commitments.
“For the foreseeable future, the role of the CSO should be to act as a strategist for the senior executive team to [help them] understand the types of expectations that are in existence or emerging for a company,” says Michael Torrance, CSO at BMO, who has worked in sustainability for more than 10 years.
Being nimble, he points out, is a must, as are what the Deloitte report calls “superlative communication skills.” With knowledge about sustainable options continually expanding, the CSO needs to present information that has not been considered before. For example, many organizations are now focused on reducing emissions in an effort to become net zero but, 10 years ago, this wasn’t on the corporate radar.
“As a chief sustainability officer, you have to be aware of all of these evolving expectations,” says Torrance, “and then be able to integrate them, plan for them and get the buy-in of the organization.”
2) INTEGRATE ESG INTO DECISION-MAKING
The investment community has been pushing for more ESG disclosure and business transparency so this is a big driver in the demand for the CSO, says CPA Davinder Valeri, director, strategy risk and performance at CPA Canada and executive director of A4S Canada, the Canadian Chapter of the A4S CFO Leadership Network.
In fact, building sustainability strategies into the core of a company is now best practice, she adds.
“Businesses have to be stewards of what they’re doing, meaning that they’re actually incorporating sustainability into their everyday decision-making,” says Valeri. “So, it’s an integrated approach. [The CSO] role spans everything that the organization does. Finance and sustainability have to go hand-in-hand.”
For large financial services firms, rethinking their business models to align with sustainable practices will require involvement from numerous functional areas, according to the Deloitte report. “This is where the systems thinking experience of many CSOs can help,” it explains. “A ‘sense-maker in chief’ can translate strategy into practice and bring co-ordination where there would otherwise be chaos.”
The CSO can be the touchpoint across the entire organization, from shaping strategy and identifying risk to aligning human resource incentives.
3) MEET STAKEHOLDER NEEDS
With advances in corporate governance, demands from stakeholders have evolved and expanded.
“Directors now need to consider a far wider set of externalities and stakeholder interests than they’ve been used to doing in the past,” highlights the Deloitte report. These mandates can be initiated between shareholders and a company, or even the government and a company, as was the case with the net-zero mandate by 2050.
“The CSO is really a new way of thinking about good corporate governance,” says Torrance. “In other words, financial outcomes and the value of the company are directly tied to how well these relationships with a broader set of stakeholders can be managed over time.”
Organizations must work to strike a balance between competing interests, says Torrance and the CSO can act as the intermediary who helps transform these new ideas into action.
HOW ACCOUNTANTS CAN GET INVOLVED
Sustainability centres around minimizing negative impacts and creating positive ones, says Torrance. Much of this boils down to how companies measure, monitor and report their own performance, he says, especially in relation to financial reporting.
“Accountants are such important advisers to business and are the custodians of really rigorous practices … I think their role is going to become increasingly important as we try to standardize and embed sustainability into business practices,” he says.
This is true whether they become CSOs or play a more integrated sustainable role as CFO, says Valeri.
Either way, Torrance thinks that, in 10 to 20 years, sustainability strategies may be so deeply integrated within an organization’s mandate that the CSO role may be no longer be needed. But for now, he says, it is here to stay.
WHAT HAPPENS NEXT
Find out how the profession is preparing for change and how ESG is critical to business resilience. Learn ways to start E&S reporting and discover other accounting for sustainability resources.