After another year in which the risks and realities of climate change were made clear, there will be few organizations for which sustainability is not high on the agenda for 2024. And yet, at EY, our most recent survey of business leaders has shown that progress on sustainability is slowing down, flatlining or even regressing.
The ambition is there, with 84 percent of organizations in the Asia–Pacific having at least one sustainability goal, according to EY’s most recent survey of sustainability leaders, the ‘Sustainable Value Study’.
But in speaking to 500 sustainability leaders in organizations around the world with over US$1 billion in revenue, there was one clear factor present in the highest performing organizations: the role of the CEO in supporting and empowering their Chief Sustainability Officer (CSO).
Agents of change
Unsurprisingly, organizations with a CSO deliver more on sustainability than those without. For example, in the Asia–Pacific region, 81 percent of organizations with a CSO have developed partnerships with non-government organizations and industry groups when compared to 65 percent of organizations without one.
CSOs in the Asia–Pacific region are especially focused on traceability and supply chain risk management when it comes to climate targets, with around 30 percent looking to invest in these areas compared to only 20 percent of CSOs around the world.
They believe it is here where they can best accelerate existing sustainability initiatives – understandable, given the volume of manufacturing in the region and the crucial role it plays in global supply chains.
Unsurprisingly, organizations with a CSO deliver more on sustainability than those without.
The survey also revealed that companies based in the Asia–Pacific are more likely than the rest of the world to have C-suite level sustainability leaders who have more contact with board members and are in a better position to drive change.
However, it is not enough to merely appoint a CSO. Companies must also ensure that they are equipped with the resources and have the influence to take such proactive approaches. Empowered CSOs such as these, whom we define as ‘transformational CSOs’, can take more targeted action and make better progress on decarbonization while creating value for the business itself.
In short, they can turn vision into reality.
The transformational CSO and the bottom line
Talking to CSOs, we found that empowered, transformational CSOs are more likely to report higher-than-expected value across all areas. For instance, 70 percent of transformational CSOs in Asia–Pacific expect higher financial value when compared to 40 percent among less effective CSOs in the region.
They are also more likely than other Asia–Pacific CSOs to see the potential in AI to optimize their supply chain and see data and technology as accelerators toward sustainability goals.
Transformational CSOs are also taking more action when it comes to climate initiatives. The ‘Sustainable Value Study’ found that they are ahead of their non-empowered peers when it comes to completing sustainability related projects.
Only 26 percent of all CSOs in the Asia–Pacific region qualify as transformational CSOs.
On average, they have completed or are in progress on 27 (out of 32) actions compared to an average of 20 for other CSOs. This is resulting in higher emissions reductions to date (an average of 19.4 percent versus 17.2 percent for other CSOs).
While these are optimistic findings, only 26 percent of all CSOs in the Asia–Pacific region qualify as transformational CSOs, and at EY we have observed the impact this has had on the way different companies approach sustainability.
For example, the ‘EY 2023 Climate Risk Disclosure Barometer’ compiled reports from across Asia, and we were able to observe the stark difference between the quality of company disclosures across jurisdictions.
Japan and South Korea received among the highest scores for the quality of disclosures. But in India, China, the Philippines and Indonesia, the quality of company disclosures significantly lagged behind the majority of others – a possible sign of a lack of input from sustainability leaders.
Unlocking the CSO’s potential
So how can CEOs level up their CSO’s potential? It starts with selecting CSOs with strong leadership skills and a deep understanding of the business model. With the war for talent still raging, this may not be as easy as CEOs would hope. But given the stakes, this is potentially the most important appointment a CEO can make for their organization.
As we noted earlier, building internal and external relationships are crucial for CSOs, given how many parts of an organization have sustainability impacts, as well as the important role of supply chains. It follows that CSOs need a seat at the leadership table.
Along with having access to the board and other key stakeholders, CSOs must also have the ability and authority to make bold decisions to shape company-wide initiatives and hold the business accountable for unmet goals.
With empowered CSOs, sustainability is also good business – for both the environment and your bottom line.
Delivering meaningful change is difficult when CSOs feel they have little power to do so – only 56 percent in the Asia–Pacific say they have the authority to hold others accountable for their performance on sustainability initiatives.
That might mean CEOs driving an update of governance structures to strengthen cross-functional collaboration. A good example is setting up business-level sustainability councils chaired by the CSO, with the CEO backing them up.
Lastly, CEOs need to support their sustainability leaders as they push other business units and leaders to understand ever-changing reporting obligations and regulations. With so many demands on workers’ time, staying up-to-date on sustainability might not feel like a priority. CEOs need to support their CSOs when they say that it has to be.
At EY, we say that sustainability is everybody’s business. As the facts show, with empowered CSOs, sustainability is also good business – for both the environment and your bottom line.
