As the world transitions from a fossil fuel economy, companies are adapting fast. Some are leading, some are lagging, but all are adapting to fast-moving changes in governments, consumers, and investors. Somewhere in the last few years, these changes have reached a point where sustainability isn’t a separate ‘agenda item’ for the c-suite. Instead, sustainability issues are becoming core to strategy and capital allocation decisions. The changing landscape is introducing real costs and risks to companies, as well as critical implications for margins and growth. That is to say, sustainability issues are on many desks across the company - with key issues for decision from investor relations, supply chain management, legal, finance, R&D, operations, marketing, public affairs, HR, and more.

I don’t see the fundamental accountability for an executive leadership team member changing. But there are new factors that will require increasing fluency in translating sustainability into risks and opportunities in each area. For example, the Chief Supply-Chain Management Officer still holds accountability for planning, procurement, manufacturing/operations, and logistics. But now that work has sustainability aspects to it – from strategies for shifting production energy sources, to human rights labor issues, to managing data about GHG emissions in procurement strategies. Take the CFO as another example. The CFO’s job as a steward hasn’t changed. But it now involves financial risk management around many sustainability issues – how a company will finance GHG emissions changes, financial implications for changing regulations and policies, investor changes, insurance changes, the impacts of climate change on infrastructure, effect of changing reporting requirements, whether there are opportunities to access a lower cost of capital for parts of the transition, to name a few. You can even look as far as HR and see that the accountability is the same, but world-class CHROs now have a new fluency. Today’s CHRO is, as ever, accountable for the people side of creating a high-performing organization. But achieving that now requires critical diversity and inclusion strategies, and careful integration of talent management with sustainability issues (knowing that attracting and holding on to talent is improved when employees are actively engaged in sustainability changes and know that their company is forward-leaning). These are only a few of many many examples. You could go through the entire c-suite and a few levels down to map out how people’s roles require knowledge of sustainability issues. The forces driving the transition in sustainability are so widespread, that executives are having to learn fast how their parts of the business are being impacted. I think a key question for high-performing leadership teams in this era is figuring out how to get up to speed fast, how to know what’s coming, how to prioritize, how to collectively make strategic decisions where sustainability drivers are shifting the landscape. It’s important to put into context, also, that sustainability is only one facet of some pretty large disruptions happening concurrently. Many companies are also navigating big changes in technology, digital, supply chains, data, workforce and more. While I work on sustainability, some of the answers to how a best-in-class company manages sustainability are really just insights about how companies effectively navigate in an era of big disruption.

All the evidence I’ve seen shows that there are many organizational structures for sustainability that work, and you have to find the right one that matches the structure and culture of your organization. But that’s not really a helpful answer to a company that’s trying to figure this out. So, instead, I approach it from a set of principles – you can walk through some org change options you are considering and rank them on these principles. 1. The Board. Executive-level org structures for integrating sustainability are likely to fail if the board hasn’t figured out how to fulfill their duties on these topics. What makes for an effective board in this era is a side-bar unto itself. 2. Integration of issues. Sometimes, senior sustainability professionals feel like air traffic controllers. There are now so many sides of the company where sustainability issues are hitting, and executives across the company are all learning. There are lots of questions and lots of ideas. Only some of those need the attention of the executive team. It turns out that the function of ground-truthing, contextualizing, and prioritizing what’s material for the company is hugely important. This is a role that requires sustainability expertise across a wide range of ESG issues, and the ability to translate them into business implications. 3. Policy and regulatory. One of the most common requests that crosses my desk is for a landscape of changes in the policy and regulatory landscape related to sustainability that could impact a particular company. The policy space will continue to move fast with substantive implications for all companies. Every company needs this information now on a reasonably regular basis. You don’t likely need the analysts on staff, but you probably need talent in the company close to the c-suite who can translate this information. 4. Competitive intelligence. In an era of serious disruption, knowing what your competitors are planning, seeing, and doing is even more core to competitiveness than in less disruptive eras. first-movers can set standards, can create new markets. But often there are benefits to waiting for some of the uncertainty to resolve, and being a follower. Either way, you need to know how other companies are solving for key sustainability issues, and this intelligence needs to inform the executive team. 5. Partnerships and investments. It’s a reasonably low lift to integrate sustainability issues into M&A due diligence processes (e.g. do you know the carbon footprint of the company you’re acquiring or whether you’re increasing your exposure to child labor issues in supply chains). What’s harder is to create leadership that strategically plans for the company’s sustainability needs – across licensing, in-house innovation, mergers, acquisitions, corporate VC investments, etc. 6. Perform vs. transform. In the end, the org structure you choose has to enable the executive team of the company to be able to balance performance and transformation in sustainability. At its most basic, there are three functions in a best-in-class sustainability org structure– managing sustainability risk, financing sustainability transitions, and creating opportunities in a new era. 7. Reporting. Reporting is a critical function of the sustainability org structure, and has been a driver of profound changes in companies. Planning for upcoming changes in reporting requirements, trying to build the systems that make this data accessible, and the proactive management of ratings’ agency information alone can require time and effort that has the potential to swamp any of the above critical functions unless this area is scoped and resourced appropriately.

This is a great question. Companies often face a lot of noise around dozens of sustainability issues that might be important to the company, but in their early stages of their journey, you can often identify where a majority of the materiality lies. Maybe it’s in energy transitions, or sustainability in supply chains. In these cases I think companies can often get by for some time with a duo of lower-level roles. You probably need a head of sustainability reporting to just manage the requirements, and then someone able to influence strategy and capital allocation in the key area(s) that matter. How these report into the c-suite matters a lot, of course.

One dynamic I’ve seen in companies earlier on this journey is that the executive team doesn’t have access to a sharp enough business translation of the sustainability issues - why a particular issue really matters for the business, what the implications are – what the numbers are over time. Is the proposal for a sustainability-related change a discussion about a ‘table stakes’ cost to stay competitive? Will it deliver a competitive advantage? Is it going to mitigate future risk? This is just a set of basic background that would be presented at the c-suite routinely. It’s not that discussions of purpose and doing the right thing shouldn’t drive executive teams to be leaders in this transitional era, but the company still needs the business case to be able to make a decision. I think if a sustainability leader doesn’t have sponsorship, they can begin to shift the culture in the company around sustainability by giving the executive leadership team what they need for these really essential discussions.

You just have to look at the numbers for this answer. The last numbers I saw were from 2021 - 73% of S&P 500 companies link executive compensation to some form of ESG performance. Granted, most are linked quantitatively, not quantitatively. Still, it’s an important signal, and ostensibly an important driver. Fundamentally (I would not have said this five years ago), I think the challenges of perform vs transform in sustainability exist across the entire c-suite – and the performance of individual executives in critical sustainability issues will impact competitiveness. As always, the key is in the metrics you pick (there are many that you would not want to pick) and whether the way this is linked will drive the right changes in the company.

Absolutely. When companies are navigating a period of great disruption, competitive intelligence becomes even more critical to decision making for multiple reasons. Let me give you three pretty obvious ones here. First, there are lots of innovations in how companies are solving common problems. Best practices in power purchase agreements, decision-making on when to electrify a fleet, how to respond to increasing pressure on human rights issues, how is executive compensation being linked to performance – and the list goes on. Of course, there are big differences in how these land in a company, but seeing how companies are problem-solving is invaluable. Second, in a period of big disruption, there are often critical points where companies can influence the standards that will define the future. These discussions inevitably have winners and losers. For example, how the voluntary carbon market becomes regulated will depend on developing standards and will have significant implications for companies. The decision of how active to be in standard-setting discussions, and which industry competitors to align with or oppose, can therefore be important. Third, there are clear strategic implications for deciding to be a first-mover, or deliberately waiting for others in your industry to take that plunge. Sometimes the benefits that come with a first-mover outweigh the risks. A company leading their industry in sustainability can build brand equity, or create an edge in hiring top talent, or create entirely new markets. Some first-mover advantages can easily evaporate, of course, but there are important opportunities. On the other hand, there are many reasons for a company to wait and follow competitors.

I’m not very good with crystal balls, but I think the next generation of executives will arrive in their jobs with a higher fluency in how sustainability issues impact the area of the company for which they have accountability. This automatically means more efficient and effective decision-making within boards and the c-suite around sustainability issues. Every company will have a critical, cross-company need for reporting, managing risk and improving how the company finds value creation opportunities. So in this sense, I would expect senior sustainability professionals to be commonplace, but their jobs will change as the rest of the companies’ executives now own their own sides of issues. Eventually, some sides of the uncertainty of this disruptive era will be reduced. For instance, workable changes in the policy and regulatory environment will be replicated and become familiar, some standards will be achieved, and our use of data in decision-making will improve (e.g. companies now have opportunities to assess climate risk to their infrastructure in ways that did not exist even a few years ago). All of this has implications for the best-in-class sustainability leadership structures in a company.