The Role of a Chief Sustainability Officer Is Bigger than ESG Reporting
For the past 10 years, the emerging roles of chief digital officer and chief data officer got all the attention. That trend has passed, however, and the new focus is on sustainability and ESG (environmental, social and governance) management.
While investments in digital transformation are still robust and growing (over $1.3 trillion per year on average, according to IDC), investments in social and sustainable development are exploding.
The main driver behind this new investment wave is compliance with the complex sets of federal and international rules and regulations coming our way. As a result, by 2022, 95 of the Fortune 500 companies had a chief sustainability officer (CSO), and the number of sustainability officers tripled in 2021 alone.
But to gain true relevance, this relatively new role must evolve beyond internal measurement and governance. It needs to be much more connected to strategic go-to-market areas, focusing sustainability efforts on financial impact and growth.
The CSO should be involved in the organization at a high level in these additional areas:
Business modeling: The CSO, chief innovation officer and chief digital officer must work together to bring forth state-of-the-art technology and progressive initiatives to support the sustainability agenda. Internally, this group must work together on gathering the right data to automate ESG reporting. Externally, they must bring in advanced sustainability technologies and science in the form of new business models and/or start-ups.
Competitive advantage: The CSO, CEO and the head of strategy must work together to make sure that sustainability becomes a pillar of competitive differentiation. Elevating the subject to the long-term strategic plan brings attention to the topic and makes sure it gets cascaded throughout the organization.
Monetization: Sustainability cannot just be a compliance play and focused on cost. It is much more than the cost of doing business. The CSO and the head of marketing must work together to ensure that sustainability efforts are properly packaged and productized. Supported by pricing and monetization teams, they can gage the sources of revenue and profit streams from sustainable products, services and business models. They prepare the value playbook for sales so that sustainability is part of sales enablement efforts.
Growth: Companies that have taken sustainability seriously derive a large amount of revenue from their efforts. Unilever, Ikea, Schneider Electric and Tesla, for example, are growing faster than others. They are riding the wave of changing consumer behaviors and perceptions toward sustainability. Unilever’s Sustainable Living brands—including Dove, Knorr, Omo/Persil, Rexona/Sure, Lipton, Hellmann’s and Wall’s ice cream—are growing 69% faster than the rest of the business and delivering 75% of the company’s growth.
Customer success: Taking a leadership role in sustainability also means educating, guiding and co-developing with customers. A CSO has to sit with customers to improve their customers’ success in sustainability areas and to demonstrate how their company can help. It is all about becoming a trusted advisor. Then, the next step is to quantify the realized value this brings to the customer by formally measuring the delivered impact through certifications, labels, new products, services, etc.
Sustainability must be focused not only on measuring internal benefits to the firm but also concrete impact to customers. For that, sustainability must be productized, monetized and priced based on value.
Stephan Liozu is founder of Value Innoruption Advisors, a consulting boutique specializing in industrial pricing, XaaS pricing and value-based pricing. He is also the co-founder of Pricing for the Planet, which specializes in pricing for sustainability. Stephan has 30 years of experience in the industrial sector with companies like Owens Corning, Saint-Gobain, Freudenberg and Thales.
