Figure out what you want to do, then the organizational form will follow
By Chris Park
Want to understand the recent history of business? Just look at the expansion of the executive suite over the past couple of decades. The 1990s saw the advent of the Chief Information Officer as companies realized that technology had crossed the line from back-office obscurity to strategic priority. Then, in 2002, the passage of the Sarbanes-Oxley Act and other regulatory pressures brought a host of Chief Compliance Officers in its wake. We’ve seen Chief Strategy Officers, Chief Accounting Officers and Chief People Officers.
And now, corporate responsibility (CR), sustainability and climate-change concerns have become the latest big issue driving the exploration of new executive roles. Investors, regulators and customers are asking pointed questions about social and environmental practices, and the market is rewarding organizations that can demonstrate a commitment to responsibility—and punishing those that don’t. Further, companies are systematically evaluating the risks posed by energy and commodity shortages and other environmental and social issues, and they want to be sure that those risks are being monitored and managed.
With all this going on in the marketplace, it’s no wonder that more companies want to make CR and/or sustainability someone’s formal responsibility. For many companies, systematically executing and reporting on CR and sustainability represents a significant change. To push those changes through and make them stick, a company needs to set goals, monitor execution, track performance and report results. Setting up a formal organization and governance model—while revising roles and responsibilities and aligning incentives—can allow a company to drive structure and establish accountability for all these activities.
In our experience, though, many companies are still looking for answers about what kind of internal organization should support their efforts. Here’s one way to start thinking about what such an organization could look like.
We believe companies need to do several basic things to meet today’s CR and sustainability marketplace demands. They need to develop a CR and sustainability strategy, define specific goals for social and environmental performance, and set priorities for action.
They have to garner internal support and encourage (or enforce) appropriate behavior. They have to keep track of investments and monitor the outcomes. They have to report the results of the company’s activities, both externally to investors, consumers and other stakeholders, and internally to employees in a way that engages ongoing support for the company’s efforts while avoiding the brand damage associated with the potential charge of “greenwashing.”
And they have to do all of these things in a way that balances risk with opportunity, all while the underlying environment changes very rapidly.
Keeping in mind all these things a CR and sustainability organization has to accomplish, you can then use the “form follows function” principle to work out the details. This approach can help you think through such questions as:
Participants should be senior enough in their hierarchies to drive change, speak on behalf of their constituents and understand the relevance of different areas of CR and sustainability to their corner of the world. We know of some companies that have even put the CEO, COO and/or board members on their working groups--another way to elevate responsibility to the top.
Figuring out who’s responsible for responsibility can certainly be a challenge. But it’s something that no company these days can afford to neglect. Just remember, the important thing is to clearly define what the CR and sustainability organization has to do—and then construct the boxes and lines on the organizational chart to marshal the appropriate resources in a way that makes sense for your company’s unique structure and culture.
The payoff? The same as it is for every other top-level function: the ability to address today’s marketplace demands in a way that gives your company a sustainable competitive advantage. Someone’s got to champion producing the most sustainable products and services in the most sustainable way.
A principal with Deloitte Consulting, Chris Park leads the Sustainability, Corporate Responsibility and Climate Change practice in the United States and is a member of its Global Enterprise Sustainability Group.