ESG for Business Leaders: How and why you should hire a Head of ESG?

In 2022 Gartner published a survey citing “CEO’s Top 10 Strategic Business Priority Areas for 2022-2023” which included Workforce and for the first time in its history, Environmental Sustainability. As a business leader reading this, your priority considerations for ESG may resonate with the following:

• We’re coming under pressure from our current or potential investors to report on our ESG impacts
• We have an ethical responsibility to understand and reduce our ESG impacts on the planet and society
• We’re being asked by our consumers and end users to disclose our company’s ESG commitments
• Our business is at risk from physical climate impacts including extreme weather events on our supply chain
• Our employees and future employees are prioritising ESG factors when making decisions on whether to join or stay at our company which is having a negative impact on attrition
• Our suppliers and clients are building ESG into their contracts and asking us to report on our ESG commitments as we fall under their Scope 3 emissions and social impact targets

Some or all of these considerations may culminate in your decision to take action, invest in ESG and sustainability and hire a Head of ESG* for your business.

Many clients I meet with at the very start of their ESG journey know they need to do something about it but often feel confused on where, when and how to start?

Typically, ESG journeys start with something called a materiality assessment. This materiality assessment identifies where the greatest material ESG impacts lie relevant to your business and sector. There are different tools available for this however the SASB standards and materiality map is a framework widely used by consultants and organisations globally when conducting materiality assessments.

Once completed, you may want to prioritise 3-4 material factors considering a) where you can make the fastest impact and b) where you can make the greatest impact. While the data gathering and disclosure of ESG is important, if you’re able to spot quick wins to drive impact, such as the introduction of LED lighting across your operations to reduce emissions, this should also be a priority.

Alongside a materiality assessment you may want to start thinking about your leadership structure, your competitors ESG commitments, your narrative and purpose. This will be key for further stages and ultimately gain buy in from your employees and change agents in the business, highlighting ESG/Sustainability as a priority and that you as a business leader are committed to it.

Once the materiality, narrative and purpose elements have been defined you can start to strategise on ways to reduce negative impacts and increase positive ones. You can start to disclose your data in an ESG report, start to engage suppliers on their own ESG journey and create a future strategy around net zero and social impact with tangible strategies and examples of how you’ll reach those commitments.

• Pull together an internal team, looking at ESG part time in addition to their current responsibilities.
• Engaging a consulting firm
• Hire a Head of ESG

• While pulling together an internal team to look at ESG part time can seem like a cost effective way to begin, often these team members aren’t ESG specialists, information gathered may have gaps resulting in incorrect data and priorities can shift as day to day responsibilities take over.
• Engaging a consulting firm is a good way to set a strong ESG foundation, there are many to choose from and range from smaller specialist boutique firms to ESG practices within the larger firms. This solution often comes at a higher cost ratio however than say, hiring a Head of ESG.
• Hiring a Head of ESG to shape, engage and lead your ESG journey is a strong solution with significant benefits. With no existing ESG strategy in place however you may find it challenging to attract the right seniority and experience level of candidates given that the sustainability talent market continues to be highly competitive.

How to build an ESG talent plan that’s right for your business and strategy:

There may be business leaders reading this article thinking “I only need a Head of ESG to satisfy our investors and clients by disclosing the right data, we can worry about strategy further down the line”. While this will be a strong consideration for many, you risk falling into the “disclosure trap”, publicising ESG data and making commitments like net zero but with no clear strategy on how to get there and ultimately making little to no ESG impact. There is significant reputational risk that others will view your organisation as greenwashing and you may miss out on the value creation opportunities from ESG when implemented in the correct way.

The above points will be particularly relevant when trying to attract experienced and senior ESG talent. ESG leaders are inherently purpose and impact driven, they seek to drive meaningful change across environmental and social factors and are currently and increasingly in demand. We’ve outlined below some key pitfalls and strategies you can use when looking to secure your new ESG leader:

• Governance – Ideally, ESG will be driven by and have a direct reporting line into the CEO. This provides the ESG leader with the necessary gravitas and accountability to drive commitment and transformation across the organisation. Where this isn’t possible, it helps to articulate to candidates the reasons why i.e you will report to the Chief People Officer because they are the greatest asset to influencing leadership across our business.

Providing a clear communication channel to the CEO and the board also demonstrates that ESG isn’t seen by the candidate and internally as an “add on” function.

• Investment & Opportunity – When entertaining new opportunities, ESG and sustainability leaders will want to ascertain their potential new employer’s commitment to ESG demonstrated by financial and non-financial investment. Many business leaders hesitate when interviewees discuss the need for a team to support them, budget allocation for ESG and the possibility of engaging with external consultants and are quick to shut down the offer of building a team and defining significant investment from the outset. It’s useful to shift the mindset from ESG as a defined destination with narrow outcomes i.e we want to provide the bare minimum disclosure needed to appease our investors and clients; to thinking of ESG as a journey, something that will evolve your business to a future proof and sustainable business model with positive impacts on the planet and society.

Communicating to potential candidates that you’re looking for them to help define if/when investment is needed but that you and the board are committed to ESG and will consider any and all proposals for investment and transformation needed to improve ESG and drive impact.

• Permanent vs Interim – A solution many business leaders overlook when considering hiring a leader for their ESG strategy is an interim Head of ESG. This solution can help bridge the gap between engaging a consulting firm and hiring a permanent leader. Interim Head’s of ESG are often highly experienced and relish the challenge of building new ESG strategies which then provides a solid platform for the business to either promote a less experienced internal candidate to take over or hire a permanent candidate externally.

• Securing an Interim Head of ESG: We recently partnered with the Chief People Officer of a global financial services firm headquartered in London, who had publicly announced a net-zero target however had no ESG capability internally or ESG strategy to deliver it. We placed an interim Head of ESG to build their purpose and narrative, conduct a materiality assessment, gather the required data to start improving their emissions ratings with the likes of EcoVadis, produce their first ESG report and open the door to an internal / external hire to continue driving ESG impacts across the business.
• Securing a Global Director for Sustainability: We recently partnered with a leader in the consumer and retail sector to secure their first Head of Environment & Sustainability. Traditionally, their emissions reduction plan and associated compliance with regulation fell under facilities management however they saw an opportunity to position themselves as a leader in the circular economy, achieve net zero and engage further with businesses globally on ESG issues. They moved Environment and Sustainability to a new function reporting directly into the CEO which cemented ESG as front and centre to the organisation, giving candidates reassurance that they will have the ultimate backing to drive transformation across the organisation.