A corporate sustainability dilemma

A newsletter from POLITICO for leaders building a sustainable future.

Dec 19, 2023 View in browser   By Jordan Wolman With help from Allison Prang THE BIG IDEA It's now uncool for any large firm to not have a chief sustainability officer. | Angela Weiss/AFP via Getty Images WHAT’S IN A CSO? — What exactly is a chief sustainability officer and what do they do? If you don't know the answer to those questions, you're not alone. They are ones that the executives themselves and the corporations that employ them are still trying to work out. In the early days of the sustainable investing movement, CSOs often performed functions more traditionally associated with public relations or marketing executives, touting their companies' environmental, social and governance initiatives for investors and the public. Now, as companies face pushback from the anti-ESG movement on the right and rising demands for real action to fight climate change on the left, CSOs are increasingly being called upon to take on tasks that better mesh bottom-line financial success with sustainability goals. The shift is reflected in a Deloitte survey that found 51 percent of CSOs reporting directly to the CEO in 2022, up from 31 percent in 2020. But even as they move closer to the centers of power in their companies, many are finding it difficult to make meaningful breakthroughs. “Many sustainability professionals inside organizations are frustrated because they see themselves as change managers and change leaders, and very often the rest of the senior leadership team — what they really want the person to do is to help protect shareholder value along with everyone else,” said Alison Taylor, a clinical associate professor at the NYU Stern School of Business and co-author of a recent CSO-focused article in the Harvard Business Review. “So in a way, the role of the CSO is really about this dilemma about what is the role of business in society, and how that's playing out internally.” While it’s easy to blame CSOs' struggles on companies’ inability to shift their focus from the bottom line to the future of the planet, some fault should be laid at the feet of the executives themselves, said Adam Carrel, a partner on climate change and sustainability services at Ernst & Young. "A certain proportion of CSOs are just becoming corporate functionaries,” said Carrel, who wrote a 2022 report on corporate sustainability. “They're people that never expected to be part of the C suite and frankly love the fact that they get a corner office and a cool job title and a car park and are not going to risk that by pushing a transformative agenda. Hate to say it, but it's true. CSOs are really captive to their organizations.” Hans-Juergen Walter, global sustainability leader at Deloitte, said that companies need to continue increasing their sustainability commitments to remain competitive and that while ultimate accountability rests on the CEO, more than half of financial firms surveyed said their CSO is the coordinator for net-zero strategy. Carrel isn’t shedding a tear over the increased scrutiny for CSOs and their companies. He said he’d rather “split the pack now” and find out which corporations are genuinely pushing for ways to solve climate change, giving way to a “more prominent” cohort of corporations and leaving those that may be caving to the anti-ESG agenda in the dust. “Very rarely do you see a sustainability function that actually has a mandate to drive sustainable transformation, which is a massive problem,” Carrel said. “We turned it into a relativistic subjective concept, where every company gets to reimagine it for themselves, and that's a falsehood. We have to drag it back to being something that is tangible in the real world.” WASHINGTON WATCH CRABTREE ON CCS — Brad Crabtree, the U.S. Department of Energy’s assistant secretary for fossil energy and carbon management, joined host Steven Overly on the POLITICO Tech podcast to explain the Biden administration’s case for capturing carbon, despite criticisms that it favors the fossil fuel industry. Here are some excerpts, edited for length and clarity: On former White House climate adviser Gina McCarthy’s statement during COP28 that carbon capture and sequestration isn’t a panacea or a next step, but just a way for the fossil fuel companies to avoid facing the reality that the transition to clean energy is real. No one is suggesting that carbon capture is the only solution to the climate math, the math that it takes to get [carbon dioxide] emissions to net zero by mid-century…. Humanity's greatest challenge is to achieve net zero emissions by mid-century. In order to meet that challenge, we need to be expanding the options for reducing emissions. On concern expressed by environmental advocates that carbon capture and storage will become a distraction from the goal of reducing and ultimately eliminating dependence on fossil fuels. There's two reasons why I think that concern is misplaced. First, we're not just talking about emissions from the oil and gas sector. If you take heavy industry, there's both energy-related emissions … but there's also what are called process emissions in some of the most climate-critical sectors of the global economy, cement, steel and basic chemicals. More than a majority of the emissions in those sectors aren't related to energy inputs. The second point I would make is that even as we ramp up alternatives to fossil fuels, which we're doing, and we're going to be accelerating, we cannot wait to decarbonize the fossil energy that we're using today. You can listen to the entire interview here. CORPORATE PROMISES GOING TO COURT — Tennessee Attorney General Jonathan Skrmetti has joined the ranks of Republican officials taking shots at BlackRock, filing a lawsuit on Monday that accuses the world’s biggest asset manager of misleading consumers “about the scope and effects of its widespread ESG activity,” Jordan reports. Skrmetti's suit contends that the Wall Street giant considers ESG factors even for funds in which it says it does not, citing overall carbon-neutral goals, proxy voting and affiliations with industry climate groups. The lawsuit also claims that BlackRock sends mixed signals on the impacts of ESG factors on financial performance. BlackRock denies the allegations, which come on the heels of a subpoena from the House Judiciary Committee, which is demanding information from the company and other asset managers as part its investigation into whether their ESG efforts violate U.S. antitrust laws. AROUND THE WORLD GREEN DILEMMAS — European industry groups and manufacturers are warning that a proposal from Germany and four other countries to ban “forever chemicals” would significantly undermine EU goals to spur microchips production on the continent. A compromise may be in the works. The five countries suggested that the chips industry be allowed to continue using PFAS for 12 years — in a nod to the sector’s strategic importance. The European Chemicals Agency (ECHA) will have to decide whether it agrees, while the European Commission and EU countries will get a final say. But the prospect of more wiggle room has spurred chip companies to ramp up lobbying and push for a more generous exemption. Pieter Haeck and Leonie Cater have more. YOU TELL US GAME ON — Welcome to the Long Game, where we tell you about the latest on efforts to shape our future. Join us on Tuesdays as we keep you in the loop on the world of sustainability. Team Sustainability is editor Greg Mott and reporters Jordan Wolman and Allison Prang. Reach us all at gmott@politico.com, jwolman@politico.com and aprang@politico.com. Sign up for the Long Game. It's free! PROGRAMMING NOTE: We’ll be off next week for the holidays but back to our normal schedule on Tuesday, Jan. 2. WHAT WE'RE CLICKING — The Financial Times takes a deep-dive look at three non-headline COP28 pledges that could have a big impact on efforts to combat climate change. — Canadian oil and gas firms are delaying steps to cut emissions to see whether Prime Minister Justin Trudeau is around to see them through. Reuters has that story. — California is on its way to becoming the second state — after Colorado — to approve rules for turning wastewater into drinking water, the Associated Press reports.   Follow us on Twitter Debra Kahn @debra_kahn Greg Mott @gwmott Jordan Wolman @jordanwolman Allison Prang @AllisonPrang   Follow us

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