(Photo by Michal Jarmoluk via Pixabay)

It has been several years since the importance of sustainability in corporate management was explicitly positioned as a matter of social consensus in Japan. Japan’s Corporate Governance Code highlighted that sustainability is an important management issue, while the disclosure of sustainability-related information in securities reports has become mandatory, which also prompted companies to step up their game.

Symbolic of this were the results of a survey conducted in 2022 by the Japan Audit & Supervisory Board Members Association. Based on the responses of 510 companies, the survey revealed that about 60% of Prime Market-listed companies have established a specialized committee on sustainability, and about 36% have appointed a chief sustainability officer (CSO) as the chief executive responsible for embedding sustainability in corporate management.

The appointment of a CSO to oversee sustainability is a recent global trend; one report from PwC has even indicated that the number of new CSOs worldwide in 2021 exceeded the total from the five years prior.

The evolving role of the CSO

On the other hand, even with the same CSO title, the roles and responsibilities that a CSO undertakes vary widely among companies. On top of that, as society changes, so do the roles that are expected of a CSO.

An article in the Harvard Business Review (HBR) notes that while the primary role of a CSO used to be communicating the company’s sustainability efforts to its external stakeholders, it has now shifted to integrating their initiatives to solve ESG issues into corporate strategy. Consequently, the article highlights how important it is for CSOs to collaborate closely with management teams and business units, and to engage in dialogue with key external stakeholders, including investors.

Expectations of future CSOs

The sustainability consultancy organization BSR outlines three different paths for the future CSOs. Currently, most CSOs fall under the first archetype, but there are expectations for them to take on roles corresponding to the second and third roles in the future.

1. The Steady Manager: The Steady Manager leads an established sustainability organization that prioritizes risk management, smooth relations with business functions, ensuring compliance, and efficient efforts to advance a small number of priorities within the existing business model.
2. The Integrated Strategist: CSOs in this model have a voice in influencing corporate strategy, within existing paradigms and business models. The Integrated Strategist incorporates sustainability considerations into core business decisions, and they are seen as an important leader.
3. The Transformative Change Agent: The Transformative Change Agent has a mandate to explore ways to influence and potentially reshape the company’s fundamental business strategy, governance, and products and services.

Another HBR article presents a radar chart that plots eight tasks as a tool for redesigning a CSO’s roles.

Eight critical tasks for CSOs

1. Ensuring regulatory compliance
2. ESG monitoring and reporting
3. Overseeing the portfolio of sustainability projects
4. Managing stakeholders’ relationships
5. Building organizational capabilities
6. Fostering cultural change
7. Scouting and experimenting
8. Embedding sustainability into processes and decision making

(Source: The 8 Responsibilities of Chief Sustainabirity Officers, Harbard Business Review)

The eight tasks listed above are necessary for promoting sustainability, regardless of whether a CSO is appointed. To use sustainability as a lever for organizational transformation, it is expected that companies will actively redefine the role of its CSO, considering the maturity of their initiatives, and communicate this both internally and externally. I too will look to delve deeper into these perspectives in my upcoming CSO interview.

(Author: Takeshi Nozawa, Translation: Alex Koolhof)