Executive Summary

This publication focuses on how companies organize—at the management level—to carry out their sustainability initiatives. We offer insights drawn from a survey of 104 companies, in-depth interviews with 20 sustainability executives, and a roundtable discussion with 116 executives from 86 firms. We found that 98 percent of companies surveyed expect the level of integration of sustainability into the business to increase in the next five years—and more than half expect a significant increase. This finding has implications for how companies organize to execute their sustainability initiatives. We also found that there is no single “correct” organizational model. The approach depends on, among other factors, the company’s “maturity” stage in sustainability, its overall organizational structure, and the capabilities of its management team. Nonetheless, certain key insights for what’s ahead emerged from our work:

Insights for What’s Ahead

• Expect more companies to appoint a chief sustainability officer, but he or she does not need to report to the CEO. About 40 percent of European companies and 20 percent of US firms surveyed currently have a head of sustainability who reports to the CEO. We expect the percentage of firms with a chief sustainability officer to increase significantly in the next three years; the appointment of one can galvanize a company’s efforts, enhance the firm’s ability to address both environmental and social topics, and signal the importance of sustainability to employees and external audiences. Currently, our survey indicates that in the US, sustainability leaders report to the chief marketing officer (15 percent), general counsel (10 percent), or heads of strategy, operations, and technology (6 percent each). In Europe, the chief human resources officer (10 percent) is second only to the CEO (39 percent) in overseeing the sustainability leader. While reporting to the CEO is not necessary to success, heads of sustainability do need access to the CEO and C-suite to ensure not only that they have the authority to get things done, but also that they can directly engage with the key strategic decision-makers at the company so the company’s sustainability initiatives can reflect, and evolve along with, the company’s overall business strategy.
• Whoever leads the sustainability function should have the authority, credibility, business knowledge, fluency in sustainability, and communications skills to drive the firm’s sustainability efforts. Embedding sustainability strategy into the organization is the top activity on which heads of sustainability spend their time. To do so, they must be able to build a network of relationships across the company and to influence and educate at multiple levels. They must also be able to “roll up their sleeves” to get the rest of the organization to understand—and get excited about—why sustainability matters to each part of the business. The role places a premium on collaborating, communicating, and connecting the company’s core business capabilities and goals to their broader societal and environmental impacts. As such, a successful sustainability leader can come from several different backgrounds.
• Sustainability teams do not need to be large to succeed, and companies should build these teams with the expectation that they will fluctuate in size and composition over time. Most companies have a dedicated sustainability function that is relatively small. Two-thirds of the sustainability functions have either one to five full-time employees (US) or six to 10 (Europe). While many sustainability executives are looking to selectively add a few members to their team with the expertise to address emerging key areas that cannot be as efficiently addressed elsewhere in the company or through third parties, they are not looking to build an empire—indeed, many see the day when their departments can be even smaller once sustainability is fully in the company’s DNA. But teams must be able to drive the integration of sustainability into the business; bring specialized expertise that would not exist in a business unit or other corporate department; track and report on the firm’s sustainability efforts; and handle the proliferation of ESG requests from investors, business partners, regulators, and others. Companies can benefit from a “dual report” model, where members of the sustainability team also report to other areas, which can reduce costs and drive sustainability integration.
• Larger companies may want to move toward a hub-and-spoke model. When companies first establish a sustainability function, they often use a centralized model (i.e., a corporate team “owns” all or most of the sustainability initiatives across the company). But more than half of companies surveyed use a hub-and-spoke model, in which a corporate sustainability team provides overall guidance and expertise, while most of the responsibility for implementing initiatives rests within the business units. For larger companies, the hub-and-spoke model can be effective in broadening the scope of sustainability efforts, integrating these efforts into the business, and identifying sustainability business opportunities.
• Boards should be involved in reviewing the firm’s sustainability efforts and should interact directly with the sustainability leader, especially as part of a broader discussion of the firm’s business strategy. Most heads of sustainability meet with the C-suite at least once every other month, but some sustainability leaders have little or no access to the board: among US companies, 1 in 5 heads of sustainability never meet with the board. As boards are increasingly accountable for companies’ ESG efforts, directors can benefit from direct access to the sustainability leader, and sustainability leaders can benefit from better understanding the company’s priorities and having greater credibility within the organization. Sustainability leaders should interact with the board in committee or board meetings, not just in separate one-off presentations on sustainability efforts. This level of engagement helps the sustainability leader both demonstrate and advance sustainability integration.
• Strengthen the connections between the sustainability and strategy/finance functions. Sustainability teams interact most frequently with the business units, the communications function, and the investor relations function. US sustainability teams also tend to interact frequently with the legal function (and much more so than in Europe)—in part because US sustainability teams are often looking to disclose publicly more information than is legally required. But sustainability teams in the US and Europe have a relatively low interaction with finance, and in the US with strategy. Integrating sustainability into the business will require shifting from a compliance and disclosure mindset to working more closely with the strategy and finance functions, not just because those areas often own core planning and budgeting processes, but also because they are key to identifying and pursuing future business opportunities.
• Internal sustainability steering committees can be more effective if they have a clear mission and broad composition. Companies commonly use internal steering committees to coordinate their sustainability efforts; these committees help set strategy and goals, execute strategy, and communicate initiatives throughout the organization. But a majority of firms surveyed (57 percent) say their committees are only “somewhat effective.” Companies can improve effectiveness by establishing two committees: 1) a C-suite–level committee that sets broad strategy and goals and 2) a company-wide committee of individuals one step below the C-suite and their counterparts from the business who are more focused on driving implementation and communication. Companies can also benefit from having subcommittees or ad hoc working groups that focus on specific issues. In any event, it’s important to be clear about the role of the particular committee—including its decision-making authority. Moreover, while business units, human resources, communications, and legal are well represented on the standing committees, companies should consider adding strategy, R&D, government relations, and finance if they have not already.
• Public companies should look not just to their publicly traded peers, but to private companies for models to implement sustainability initiatives. Because of fewer reporting and compliance pressures, private companies may have a leg up on building a sustainability culture among employees. Indeed, heads of sustainability at private companies spend more time on employee engagement and training than their peers at public companies, and significantly less time on compliance and reporting.

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