Is Sustainability a passing fad or a lasting trend?
Demand for Chief Sustainability Officers.
State of the Sustainability profession.
(Spoiler: Sustainability is here to stay and the trend is only getting bigger)
Sustainability seems so big right now. Consider that:
Over 54 percent of the growth in the consumer packaged goods market over a recent five-year period was driven by consumer demand for sustainability-marketed products;
Shareholders have filed a record number of ESG-oriented resolutions with US companies so far this year, already up 22 percent from this time last year;
A record number of companies are publishing sustainability or CSR reports, including 92 percent of the S&P 500 index and 68 percent of the Russell 1000 index;
A record number of companies are voluntarily disclosing climate and environmental data to the CDP and a record number are also setting science-based targets for net-zero climate plans;
It’s easy to point to a few headlines and say that sustainability is on the rise. But as soon as you do that, you are left wondering how much of what you just read was simply media sensationalism or slick greenwashing? There is no doubt that sustainability is popular, but is it a lasting trend or simply a passing fad?
To answer that question, what better way than to speak to corporate sustainability teams themselves and find out where the action is. After all, how a company spends its money is a quick way to tell what it considers important. If the goal is to greenwash, bring on more marketing professionals; if the goal is to take greater accountability over social and environmental impacts, bring on more sustainability professionals.
Two recent reports have done just this, so let’s see what they have to say.
First up, the GreenBiz Group released their most recent 2022 State of the Profession report which was completed with the assistance of Weinreb Group Sustainability Recruiting, the Global Reporting Initiative, and the Environmental Defense Fund. This is the most recent edition of the biennial report GreenBiz Group first launched in 2016 looking into the state of the corporate sustainability profession--and this year’s release did not disappoint!
The results are drawn from 1,463 completed surveys with respondents hailing 81 percent from the USA and 56 percent from large organizations (defined as annual revenues exceeding $1 billion USD). A full 95 percent of respondents are employed in corporate sustainability teams, with the remaining 5 percent being consultants thereto. So, what do these survey responses tell us?
Among the large organizations, 76 percent reported an increase in team size (this response rate is up 18-points compared to the previous survey conducted in 2019) and 74 percent also reported increases in their budgets (up 24-points over 2019). Clearly, large organizations are expanding their toeholds in sustainability.
Better yet, the interest in sustainability is expanding beyond the offices of the sustainability team. A full 60 percent believe their CEO is involved and meaningfully engaged in the corporate sustainability program--up from only 43 percent back in 2019. Only 13 percent believe their CEO is only paying lip service to sustainability, while the remaining 26 percent see a degree of interest from their CEO but do not believe it to be a priority.
We mentioned that sustainability teams are growing, and now 42 percent of respondents report working on teams of 11 or more individuals, up from 27 percent in 2012. Most teams are led by an executive-level position, with 52 percent of teams led by a VP or Senior VP, 34 percent led by a Director or Senior Director, and 8 percent led by a Manager or Senior Manager. The remaining six percent of sustainability teams are not led by an executive fully dedicated to Sustainability.
All team leaders are typically well-educated with nearly three-quarters holding a master’s degree…and all are relatively well-compensated, with Managers commanding an average total compensation of $146,900, Directors at $227,158, and VPs at $404,972. (We should add that it is reasonable to expect these figures to be moving upward over the coming years, as hinted in another article, discussed below.)
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Such positive trends are also reflected in a second report released this week, although with certain caveats. Google Cloud commissioned The Harris Poll to survey 1,491 executives across 16 countries on corporate sustainability developments. Google Cloud is developing a variety of novel enterprise impact measurement applications and this poll was conducted as part of the company's market research for such tools.
Results show that Sustainability and ESG are top priorities for executives with close to 10 percent of a company’s budget (on average) now going to sustainability efforts and with 82 percent of executives expressing a desire to further prioritize sustainability.
As it stands now, 72 percent of executives attend an average of nearly five sustainability-focused meetings per quarter and nearly half are willing to have their compensation linked to sustainability goals (Interesting to note that this intention demonstrates a generational pattern as being higher among Millennial executives, followed by Gen X, and lastly Boomers).
Impressively, 96 percent report having at least one program in place to advance sustainability initiatives and 86 percent believe their efforts are making a difference in advancing sustainability…however only 36 percent have measurement tools in place to quantify such efforts and outcomes.
Naturally, this discrepancy would suggest many executives may be overstating their organization’s sustainability performance--and this does appear to be the case as 58 percent agree that “green hypocrisy” exists and that their organizations may have overstated their sustainability efforts.
This does not mean that these organizations are necessarily greenwashing, as some news articles have spun the headline figure (for example) but it does highlight the challenge many corporate sustainability teams face, which is that the demand for performance is growing faster than is the teams’ abilities to deliver such performance as well as the capability of many audiences of understanding the processes necessary to deliver such expected performance.
This doesn’t mean that it is all smoke and mirrors but rather that the interest and commitment to sustainability is growing faster than is the understanding of sustainability. Sustainability, although popular, still remains quite vague at an actionable level and sustainability teams are often confronted with the task of defining what they are acting on while also acting on it at the same time.
Greenwashing, as we’ve said before, is benefitting from intentional deceit. Greenwashing must be called out when encountered, but calling everything ‘greenwashing’ only serves to diminish the term. That greenwashing would be occurring does not surprise me, but we imagine much of this “green hypocrisy” stems from misunderstandings, miscommunications, and misaligned timelines, and not intentional deceit. Again, a caveat to the positive growth of sustainability, but not a detraction.
So what does this all mean?
The market for sustainability professionals is growing substantially because sustainability is so much more than simply a passing fad.
Sustainability is business strategy…and we know this because companies are acting on it…and based on budget projections, companies are going to keep refining how they act on it.
So, whatever it is you were considering doing in Sustainability--whether it was changing careers, launching or investing in a start-up, majoring in college, catalyzing a community group, leveraging it into a political career, defining a new business unit, or anything else (within reason!)--it sure seems like a good time to try.
Finance is Betting on Sustainability This report was released by Deloitte in February 2021, and it is one we keep coming back to when people ask us about the future of corporate sustainability teams. We should point out that this report addresses the role of Chief Sustainability Officers at financial services firms which makes it very interesting as these firms are always trying to stay one-step ahead of where they think broader markets are going. Based on responses highlighted in this report, it is clear that financial services firms expect sustainability to be far bigger than it is today and they are building out the teams they need to succeed in this futurescape.
Discussions with executive recruiters and recently hired Chief Sustainability Officers show that more corporate CSOs have been hired in the past year than in all previous years combined. Sustainability, once a nice-to-have, has become a strategic imperative and competitive differentiator…and now the race for talent is on. Over one-third of recently hired CSOs filled inaugural positions which means that not only are teams growing but new teams are being formed. Accelerating demand for sustainability leaders in response to shifting market dynamics and increased regulatory demands is leading some recruiters to report potential total compensation packages in the range of $800,000 to $1.5 million for senior leadership. Yet in all of this, recruiters and recent hires agree on one thing: there is no standard definition for the role and responsibilities of a CSO.
Looking at 1,640 publicly-traded companies, PwC determined that 30 percent of companies had a formal CSO role, that more CSOs were appointed over the past year compared to all previous years combined, and that companies with CSOs performed better on ESG metrics as ranked by Refinitiv. Digging deeper, however, it becomes apparent that too many CSOs are limited in their mandates as 39 percent of North American CSOs and 57 percent of European CSOs (within the review sample) are constrained to sustainability as a component of Corporate Social Responsibility or Environment, Health, and Safety and not sustainability as a strategic initiative.
In the end, Sustainability is a worldview that has hit a tipping-point. There will be many ups and downs to come, but it is nonetheless here to stay. We are focused in this space and will have more to say in our next edition, in the meantime, please connect with us on Twitter and LinkedIn , or from our website to continue this discussion in greater detail.