One disturbing trend cannot be ignored as I look across the sea of sustainability and ESG jobs that have cropped up over the past 18 months. Most sustainability roles are focused on one thing - metrics and disclosures. This isn’t surprising as companies are on edge between the EU signing CSRD, the SEC (maybe) releasing its climate ruling in April, and the International Sustainability Standards Board (ISSB) continuing its ongoing accounting standard integration. This new wave of rules requires sustainability and environmental disclosure expertise. As a result, boards, CFOs, and General Counsels are getting nervous about who knows what.
Conversely, the world is full of talented people who drive change. If you need some inspiration, I recommend checking out the interviews on the Environmental Professionals Radio podcast. Every week, Nic and Laura interview fascinating people working towards or after their Ph.D., those engaging in policy, people who have left the corporate world behind for meaningful work, and more. As with many sustainability and environmental professionals, these people often work outside the corporate world, following their passion for making an impact locally and globally.
And so, we have observations that are working in opposition.
There isn't enough sustainability talent or people who understand the standards and regulations to help every company report to stakeholders.
Talented sustainability professionals want to pursue their passion to save us and the world.
The pressure on both sides is actually shared. While the pressure for boards and companies is to report, that pressure is built to help companies improve their carbon footprint and help lower global emissions. Sustainability talent is often in it for similar reasons. The problem is that the corporate world is transitioning towards disclosures and is currently mired in its fever rather than the long-term goal of operational shifts. As a result, not all companies have recognized the importance of driving impact, planning for change, or integrating ESG. The jobs they post are disclosure-related, akin to a tax professional or accountant, and sustainability professionals are turned off.
Now, I can hear some of you complaining (because I do all the time) that sustainability and disclosures are not necessarily ESG because they aren’t material. Let’s take a few words to look at that as this broader issue cuts across the E, S, and G.
Environmental: While disclosures may not necessarily be a risk or opportunity (unless your company has material transition requirements or is trying to get placed in an Impact Investment Fund), there is an intersection with material E issues. Disclosures are an essential tool to help your company understand its operations better. This knowledge can lead to more informed insights about your E risks. In other words, sustainability efforts can drive attention to material issues.
Social: The talent gap issue is a substantial Social challenge. Remember, the S is about social issues, and sustainability often impacts those in the communities in which you operate. That hits regulation, local talent, customers, etc. The S is also about stakeholders. First, stakeholders want to understand your disclosures from investors to customers. Second, your company likely employs talented and passionate individuals who could learn sustainability and become experts on the intersection of these issues with your business.
Governance: Disclosures represent a compliance challenge, a risk that must be mitigated. Like the other pillars, boards and executive leaders should lean in here and see what they can uncover to improve the business.
Aligning passion and disclosures, sort of
I’d hate to think of a sustainability professional who understands the science or can dive deep into a meaningful topic instead performing non-material carbon calculations. Yet, there are still compliance requirements and long-term benefits for a company to understand these numbers. What can be done?
This is a tough one. First, we need to understand what we’re driving toward and why. That means a company should have a Sustainability Committee that looks into several things:
Upcoming regulations and existing standards (including roles like Finance, Risk, and Legal)
Environmental impact the company has on the world (Sustainability professionals, Operations)
Material Environmental issues and their stakeholders’ needs (all of the above)
Alice Breeden, a partner at Heidrick & Struggles, put it this way in the WSJ:
Companies have increasingly formed board-level sustainability committees to help them work through their climate efforts. In the longer term, the work of these sustainability committees should be more integrated into the company’s overall strategy
This integration is key. As my friend Drew Wilkinson says, “Sustainability is everyone’s job.” In this context, you want to make sure you engage the experts where they need to be. While sustainability professionals might be consulted in disclosures, carbon accounting, and regulatory impacts, your company needs these people to do two things. They must actually be working to understand and lower your impact and manage the impact of the world on the company.
Other roles at the company should learn and deliver carbon accounting and disclosure requirements. In fact, the name gives it away - Accounting (and Finance). Nico McCrossan of GreenBiz believes this shift is happening as he writes in Is sustainability becoming all about accounting?
Sustainability professionals don’t need to become accountants. Accountants need to become sustainability professionals, and they’re starting to.
This shift has to happen as accountants are familiar with working with the complexity of numbers within systems across the company that hide activity data. They also understand the importance of auditability and have experience with issues like restatements.
With the regulations aligning to inform shareholders about climate and sustainability activities, it makes sense to have Finance responsible for disclosures. Companies must determine what works for them, but this group is a starting point.
The CFO understands the aforementioned controls and policies and has visibility into the CEO and board, including for budget. This is critical as the next thing up after companies figure out how to disclose will be questions about who is actually making progress. From there, the leap to material Environmental issues is short because the data to make more informed decisions will be available.
Regarding the regulatory requirements for disclosures, a few teams, including the Head of Risk and General Counsel, need to be involved. These teams are familiar with regulations and the risks that surround them.
Now, this doesn’t leave sustainability professionals off the hook entirely. These leaders and teams must leverage sustainability expertise within the company to align with those disclosures and regulations. After all, the world is still very much in transition. As a result, sustainability professionals may still find themselves conducting this work, but they need to set the pace for others to take it over. That is part of working as a valuable advisor.
In the meantime, sustainability professionals should also be afforded the time and budget to run meaningful projects for the company. This expertise can ensure selected projects are high quality and avoid greenwashing. As much as marketing wants to lead here, the work must lead.
The time will come (and I’d say in the next 2-3 years) when disclosures will be reported as companies report financials. During that time, scrutiny of what your company is or isn’t doing will come. Just making the numbers dance or go down won’t do. Stakeholders will examine the disclosures and expect your company to manage to them. For example, what was the carbon impact of a new product? Where is that number that shows your operational improvements from a supplier change?
That’s just a sample of how the carbon accounting questions will evolve as companies adapt disclosures. Remember, climate risk is still hanging out there as well. Right now, sustainability professionals are at a unique point to enable companies to meet their disclosure requirements and ensure they will drive all of these future items with the planet and the company in mind.