How Do You Incorporate Sustainability in Your Corporate Structure for Tangible Impact?

Where sustainability is positioned within an organization can hint to where the organization thinks the highest business risks lies. If sustainability is considered a legal risk, the sustainability lead may report to the legal counsel in the company. On the other hand, if a company is working in a heavy-regulated industry, the sustainability function may be a part of the government and corporate affairs department. Mostly, what we see more commonly, is for sustainability to be seen as a part of a marketing opportunity, so the function may report into marketing communications. A company with such a structure might be more influenced to promote sustainability topics that prioritize projects that appear to be more sustainable than they actually are, also known as a process called "greenwashing".

In Asia specifically, a study has found that most corporate sustainability departments have evolved from the communication function. Almost 70% of corporate sustainability leaders in Asia have a communications background – a number much higher than in other regions. This is not an entirely pessimistic feature though, as experts in ESG roles say that a strong background in communication is beneficial for an individual in the Chief Sustainability Officer (CSO) role. Skills such as connecting internal and external stakeholders, building brand equity, and managing reputational risk are key skills required for the role - alongside proper reporting structures and defined responsibilities.

This is also not to say that any of these reporting structures are wrong – they just highlight where the organization believes the impact of sustainability will be driven through. As the topic of sustainability itself matures, there is an optimistic view that corporations are more likely to create a standalone sustainability unit, allowing for more cross-functional collaboration and autonomy for sustainability leaders.

Another report published by Sustainable Finance Institute Asia and Governance for Stakeholders shared that there are two most common types of sustainability governance structures emerging in Asia.

1. The first being having an entire board overseeing sustainability, without any committee being tasked with specific climate goals or deliverables,

2. or multiple existing committees taking on that responsibility.

These committees are commonly found to be the risk committee, audit committee and remuneration committee. With how new the topic of sustainability is, whether a separate board for sustainability committees is truly critical to the success of an organization's sustainability effort is yet to be determined.

Although, anecdotal data has hinted that a company that takes sustainability seriously is more likely to appoint a sustainability chief that reports directly to the Chief Executive Officer (CEO). They are also part of the executive leadership team, and has regular access to the board and key stakeholders. In a recent report by PwC, CSOs that report to the CEO were labelled “CSO with impact”, and those that don’t are dubbed “CSO light”.

In general, most sustainability consultants recommend that the appointed CSO is one who is able to develop and maintain good relationships with the heads of other departments. They must also know how to integrate sustainability and commercial objectives, so that the two are not in competition, in order to achieve success in their sustainability goals. Above all, as well as the talent and skills to drive the sustainability agenda, it is no doubt that they must have a passion for the topic to make an impact.

This article was produced by the team at SPARKD Partners as part of its August Articles - a series of Supply Chain articles published every Tuesday and Thursday for the month of August. Click the button below to read more of our articles.