How should companies best structure leadership and responsibilities for dealing with Environmental, Social and Governance (ESG) factors in a world being reshaped by the pandemic? There is no single right answer: in Fidelio’s Search practice we see a heightened interest in executive ESG roles and also demand for ESG experience in the Boardroom. There is clear evidence corporate ESG capability is evolving rapidly in response to the immediate crisis, as well as the longer-term pressures of climate change. At present there is no one size fits all template for the ESG role. Recent experience in ESG mandates has underscored the importance of a rigorous Search process, especially as this is an emerging discipline where responsibilities and objectives are less well established. In this Table Talk we share what to take into account in the ESG appointment process.
THE CHALLENGES OF ESG APPOINTMENTS
As the importance of ESG increases, and under intense business model pressure from the fallout of the Covid-19 epidemic, companies are up-skilling and addressing the question “what do ESG roles look like in the more stakeholder-focused environment ahead?” The scope and importance of ESG is evolving rapidly, it is therefore vital that companies develop a clear idea of what they wish to achieve and what new roles need to deliver before – not after – appointing a “Head of ESG” “Chief Sustainability Officer” or a “Director of CSR”. This role is becoming fundamental to strategy and purpose. It is also bespoke to the company: sector, culture and corporate ambition are huge determinants of who will flourish in the role and also the attributes that the successful candidate will need to bring. In the ESG challenge, roles are being defined and shaped. Title is not key but the scale of the ESG ambition is, as well as the ability to work with colleagues to deliver. Leading Boards are investing the time to oversee the development of an ESG strategy. They are also ensuring that ESG leadership is in place in particular at CEO and Executive Committee level. Against a backdrop of rapid change the following steps deliver results in the search for ESG leadership.
BUILDING AN ESG CAPABILITY
1. Define the Role Clearly
ESG is difficult to get one’s arms around. Therefore, role definition takes heavy-lifting and focused up-front effort. If done well the clarity of thinking in defining the role translates readily into a candidate brief that will help to position the role and attract excellent candidates. The key is to articulate what the role is expected to achieve, including KPIs and specific timescales wherever possible, and how this aligns to strategy. As ESG is evolving so rapidly companies are turning to benchmarking to highlight best practice, both within the relevant sector and more broadly across leading international corporates; Fidelio is supporting with bespoke benchmarking studies.
2. Beyond the usual suspects
The beauty of the ESG role is that it is new and evolving. There is no case for falling back on a narrow pool of candidates. Quite the opposite. ESG requires fresh thinking; it also requires the ability to think about major environmental and societal injustices. Moreover, we are seeing the first explicit links between a company’s creditworthiness and the diversity measures it takes. It would be foolish to overlook the opportunities of diversity in conducting a search and making an appointment in ESG. Clearly diversity and inclusion in its broadest, richest sense - of gender, ethnicity and experience – is deeply interwoven into the goals of ESG and it is eminently possible to attract talent cross-border, cross-sector, and cross-function to senior ESG roles. For ESG the “Talent Shortage” requires fresh thinking and surely should not be used to excuse a lack of diversity in the selection process. The success of a search depends to large degree on:
the strength of the process,
the understanding of the role,
and the quality of the network.
All three are critical for senior ESG appointments.
3. Decide How to Decide
Decide who makes the decision and how. Although the ESG or sustainability role looks and feels different, agreeing the interview and selection process upfront and ensuring a level playing field is vitally important. It allows candidates and the Hiring Committee to derive the insight and information needed to make a good decision. Lack of clarity as to who is making the decision may well add to the ambiguity of the role and is not only likely to deter good candidates but it may result in lowest-common denominator decisions based on nebulous criteria.
4. Project Manage for Good Governance
ESG is about governance and the senior ESG/Sustainability Officer will be vital to the success of the strategy. Therefore, it’s essential to ensure a good appointment and to monitor progress in a structured and transparent way. This discipline substantially increases the likelihood of success and mitigates other risks: that the search takes too long, fails to produce the required diversity of candidates, or fails altogether. Moreover, well run project management with regular reports and oversight can provide an audit trail to satisfy external stakeholder review of the process. This is absolutely in line with the increasing expectation for Board and senior executive searches to comply with the requirements of transparency and good governance.
This is how the Search for ESG leadership succeeds. For further details contact Mark Cumberlege at firstname.lastname@example.org.