Small Teams Driving Integration of Sustainability into Business

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Nov 04, 2021, 10:30 ET

NEW YORK, Nov. 4, 2021 /PRNewswire/ -- As leaders at COP26 tackle climate change, a new report sheds light on how companies can organize themselves to integrate sustainability into their businesses. Produced by The Conference Board, the report covers issues including where sustainability sits within companies, the size of sustainability departments, and key priorities of sustainability teams.

According to the report, there is no "right" answer for where sustainability sits in an organization. While having a chief sustainability officer who reports to the CEO can galvanize a company's efforts, reporting to the CEO is less important than access to the C-suite and board. A company's sustainability leader needs strong strategic planning and persuasion skills; a core team that can carry out certain essential functions; strong relationships with areas such as finance, strategy, law, human resources, and corporate communications; and clear governance structures that can help integrate sustainability into the business.

The report's insights are derived from a survey of more than 100 sustainability executives, in-depth interviews, and a roundtable discussion with more than 100 sustainability executives. Additional insights include:

Where does Sustainability Sit Within the Company?

In the US, 19 percent of sustainability heads report to the CEO, compared to about 40 percent in Europe:

US sustainability leaders report to: the CEO (19 percent); followed by the Chief Marketing Officer (15 percent); General Counsel (10 percent); or heads of Strategy, Operations, & Technology (6 percent each).
European sustainability leaders report to: the CEO (39 percent); followed by the Chief Human Resources Officer (10 percent); Chief Strategy Officer (8 percent); head of Corporate Affairs (8 percent).
Access to the CEO is more important than reporting to the CEO: Reporting to the CEO isn't necessary. But sustainability heads do need access to, and engagement with, the CEO, C-suite, and the company's other key strategic decision-makers. That ensures the company's sustainability initiatives can reflect, and evolve along with, the company's overall business strategy.

What Occupies the Sustainability Leader's Time?

Most time-consuming activities: Overall, sustainability heads say they spend the most time on 1) embedding sustainability strategy in the organization; followed by 2) strategy development; and 3) reporting and communication.
Key competencies of a successful sustainability leader: Given the amount of time devoted to embedding strategy in the organization, exceling at this job requires a few key attributes: business knowledge, credibility, authority, fluency in sustainability, and superior communications skills.
At smaller companies, nearly twice as many sustainability leaders say reporting is among their most time-consuming tasks:

Among companies with revenues of less than $5 billion, nearly two thirds (63 percent) of sustainability heads rank reporting as one of the five activities on which they spend the most time. That compares to about one third (32 percent) at companies with revenues of $25 billion and over.

How Big is the Typical Sustainability Team?

US teams most often have 2-5 full-time employees, and European teams most often have 6-10:

US companies: The plurality (42 percent) has teams composed of 2-5 full-time employees.
European companies: The plurality (33 percent) has teams composed of 6-10 full-time employees.

Compared to European companies, twice as many US companies have one-person teams:

US companies: 25 percent have central sustainability teams composed of one individual.
European companies: 12 percent have one-person teams.

Success doesn't hinge on having a big team. The ability to fulfill four key tasks should inform size:

Drive the integration of sustainability into the company's business.
Use specialized expertise (which doesn't exist elsewhere at the company) for certain work.
Track and report on the firm's sustainability efforts.
Handle the surge of ESG requests by investors, business partners, regulators, and others.

"Sustainability executives are not looking to build an empire," said Thomas Singer, Principal Researcher at The Conference Board ESG Center and author of the report. "Most sustainability executives who lead small teams, for example, think having a team of six to 10 would help them accomplish what they need. Indeed, some heads of sustainability who oversee large teams see the day when their corporate teams may decrease in size, due to sustainability being fully embedded in their company's DNA."

How Often Does the Sustainability Leader Meet with the C-suite and Board?

Most US sustainability heads meet at least bi-monthly with the C-suite, at least annually with the board:

C-suite engagement: Among US companies, 54 percent meet with their C-suite monthly or every other month.
Board engagement: Among US companies, almost four in five (79 percent) sustainability heads meet with the board at least once or twice per year; one in five (19 percent) never meet with the board.

"Boards are increasingly accountable for the ESG efforts of their companies—from climate change risks to diversity to supply chain resilience and more. So, now more than ever, boards can benefit by having direct access to their companies' sustainability leaders," said Paul Washington, Executive Director of The Conference Board ESG Center. "And sustainability leaders, too, stand to benefit immensely by having direct exposure to their boards, including by getting a better understanding of the overarching priorities of their organizations."

How are Sustainability Initiatives Implemented?

63 percent of larger companies ($10 billion and over) use the hub-and-spoke model: Under this approach, the sustainability team provides overall guidance, while most of the responsibility for implementing initiatives rests within the business units.

For larger companies, the model can help in broadening the scope of sustainability efforts, integrating sustainability into the business, and identifying sustainability-related business opportunities.

Centralized structures are most common among the smallest companies: Among companies with revenues of less than $5 billion, a plurality (44 percent) use a centralized model.

Which Departments Most Interact with the Sustainability Team?

Amount of engagement—most and least—with other functions:

Most engagement: Overall, sustainability teams interact most with 1) the business units, followed by 2) communications; and 3) investors relations.
Least engagement: Overall, sustainability teams interact least with 1) country/region leadership, followed by 2) marketing; and 3) finance.

Notable differences between the US and Europe:

European sustainability teams: They interact significantly more with the strategy function, public affairs, finance, and the CEO. They spend far less time interacting with marketing.
US sustainability teams: They spend significantly more time interacting with legal.

Sustainability teams can benefit from more interaction with finance:

Among the functions with which the sustainability team spends the most time interacting, finance overall ranks 11^th among 14 functions. If sustainability teams want to better integrate sustainability into their businesses, engaging more with finance will be critical. The function often owns core budgeting and planning processes and can help identify and pursue future business opportunities.

Looking to the Future: What's in Store Over the Next 3-5 Years?

More integration into the business: 98 percent expect an increase in the level of integration of sustainability into the business. 40 percent expect it to somewhat increase, and 58 percent expect a significant increase.
Modestly larger teams: 74 percent of survey respondents expect that the size of their sustainability teams will increase. 59 percent expect it to somewhat increase, and 15 percent expect a significant increase.
More prominent profile of the sustainability function/team at their firms: 88 percent expect the profile of the sustainability function/team in their organizations to increase. 42 percent expect it to somewhat increase, and 46 percent expect a significant increase.

About The Conference Board ESG Center
The Conference Board ESG Center serves as a resource, platform, and partner to help Member companies address their priorities in corporate governance, sustainability, and citizenship.
www.conference-board.org/ESG

About The Conference Board
The Conference Board is the member-driven think tank that delivers trusted insights for what's ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org

SOURCE The Conference Board