New Business Demands Give Rise to the Fractional CSO

05 July 2023 by Catherine Harris
blog author

​The world is changing rapidly. With the escalation of climate change and social pressures taking center stage, businesses remain a key stakeholder in making critical progress on these topics. As such, over the past 20 years the rise of the Chief Sustainability Officer has gone from a fringe C-suite position to a critical strategic partner for the CEO today. In a survey of CEOs conducted by the United Nations Global Compact, 93% of respondents agreed that sustainability will be important to the future success of their business, according to data from the United Nations.

Companies are feeling the pressure to act fast on sustainability and social impact, which is leading to an unprecedented macro-environment in this field where there is a dearth of experienced professionals in sustainability – even though every company needs them. This is putting a strain on businesses large and small, private, and public, that have not yet begun to embark on their sustainability journey, or do not have the resources to hire a full time Chief Sustainability Officer.

“The CSO is really a kind of unicorn, in that, we have to think about these issues from every angle, every function and every stakeholder group, to figure out ‘how do we develop and execute a strategy that meets the needs of all different functional stakeholders,’” said Danielle Azoulay, a fractional CSO and founder of The CSO Shop , a company that helps operationalize sustainability strategies for companies new to sustainability.

Enter a new kind of independent contract worker – the Fractional CSO. By leveraging the fractional model that has successfully existed in the startup space, usually for CFOs and CMOs, fractional CSOs can help many companies catalyze sustainable change in this landscape of increased urgency. The percentage of companies outsourcing their Chief Sustainability Officer role is expected to grow from 15% in 2018 to 25% by 2022, according to Verdantix.

Before working with companies independently, Azoulay held sustainability leadership positions at Bed Bath & Beyond and L’Oréal USA and is currently an Adjunct Professor at Columbia University.

Currently, she helps companies identify opportunities to create environmental and social impacts – be that in natural capital, carbon emissions and/or water – in supply chains, establish and exceed sustainability goals, increase social awareness, engage employees and suppliers on sustainability issues, and measure company progress.

At its most successful, this strategic relationship between the CEO and fractional CSO, can give the insights on upcoming trends and challenges, and how to make those challenges into opportunities to drive growth with consumers, or be a differentiating factor for them within their market, according to Azoulay.

“I think there's a lot of opportunity there for CEOs to also become a more confident leader on sustainability and social responsibility because, ideally, the fractional CSO is there to also train CEOs on how to feel comfortable talking about these issues in a real way,” she said. “There is a lot of opportunity for this relationship to be something unique and also beneficial for this CEO and the organization at large.”

Different companies have different needs or are in different phases of their sustainability journey. By utilizing a fractional CSO, a company can benefit from varying skills sets; a company that is newer to sustainability may need help developing a sustainability framework and strategy for reporting, while a more mature company may require an expert for Board education, C-Suite engagement, or help with investor meetings.

Utilizing a fractional CSO, can have the benefit of keeping costs low and leaving more resources for implementing the sustainability programs and initiatives they inform.

The regulatory environment is also transforming the way companies conduct business – and is a key success factor for which businesses will continue to function into the future.

Following investor demand, the timeline for the International Sustainability Standards Board (ISSB) has confirmed that global climate and sustainability disclosure rules will take effect in January 2024.

The rules, which will be issued by the end of June, will provide a general framework for reporting materiality on sustainability-related issues, specific rules for climate – including risk factors for extreme weather events and greenhouse gas emissions, according to The Board’s announcement.

Companies will be required to disclose the risks and opportunities they face related to climate, including the implications for the company’s financial position, performance, prospects, business model and strategy.

“The investor stakeholder is really requiring ESG disclosures as an indication of material risk in a way that they never have before,” Azoulay said. “Through these disclosures, investors can get a greater understanding of how businesses are impacting the planet and society, and they want to make sure that they're leaving a better legacy, perhaps, than the generation before them.”

Meaning, a company’s ability to grow in an already competitive landscape, depends on its ability to accurately comply with regulation – something many companies are not currently equipped to do.

As the role of the CSO is evolving to assess risk and build resilience, identify emerging opportunities for growth, and influence the thinking and behavior of businesses, investors, and regulators, this model can also benefit sustainability practitioners, giving them more control in choosing companies that are aligned to their destiny.

“It is impossible to gauge the level of commitment of a company until you are truly inside of it so taking new roles in sustainability can be a gamble,” Azoulay said. “Working as a fractional CSO is also a great way for practitioners who want to be in-house, to test the water before jumping in.”

Ultimately, having an experienced sustainability professional can help companies confidently build sustainable frameworks, implement goals, protect against accusations for greenwashing and give businesses measurable ESG achievements to share with the public.

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