Ed. note: This is my first blog since coming down with the new COVID variant. I want to thank Zach Barlow, Liz Dunshee, and the rest of my coworkers at CCRcorp for stepping up and covering for me. I urge everyone to ensure your boosters are current. This week has been – and continues to be – a most unpleasant experience (channeling dry British humor as best I can), and the longest I’ve ever been away from work for medical reasons.
It is no secret that hiring for Chief Sustainability Officers (CSOs) and similar high-level ESG positions has seen a record setting frenzy in terms of number of open positions, hires and of course – compensation. I certainly never expected to see these numbers in my lifetime. Earlier this month, the Financial Times wrote about the current status of CSOs:
The CSO has become a crucial member of the management team, a rise reflecting sustainability’s increasing prominence on the corporate agenda… Last year, 28 per cent of 1,640 public companies surveyed by management consultancy PwC reported that their CSO was part of the C-suite — the highest executive level — up from just 9 per cent in 2016.
This has been welcome news but as 2022 has worn on, the specter of a real recession looms and layoffs are already happening as discussed in this LinkedIn article:
Now companies across multiple sectors are making staff cuts as executives worry about a possible recession and weigh “all manner of adverse near-term effects on their businesses”…
Just yesterday, Federal Reserve Chair Jay Powell gave a press conference, with CNN commenting:
Throughout Powell’s press conference, he referred repeatedly to what he predicts will be a “softening in labor market conditions” as a result of the bank’s aggressive interest rate increases.
Allow us to translate: People will lose their jobs…
Unemployment is around 3.6% — almost a 50-year low. And while the Fed is doing its best to avoid going too hard on rate increases, history shows that recession is a real risk, which would likely result in millions of people losing their jobs or facing wage cuts as employers scale back their businesses.
A new survey from Gartner found that even though executive attention is on ESG, that doesn’t mean ESG is safe from spending cuts:
Thirty-nine percent of CFOs and CEOs surveyed indicated sustainability would be one of the first areas where spending was reduced, the study of 128 executives found, making it the second most popular area to reduce investments besides M&A.
There is even the possibility of layoffs on Wall Street that could impact ESG/sustainability leaders in the financial sector.
In the span of just a few months, newly-hired hot CSOs may find themselves standing on shifting sands. Frequently, administrative and support functions aren’t able to convincingly demonstrate they are essential – meaning a connection to revenue generation, legal mandates, production or other business-critical functions. Sustainability staff and leadership can easily be perceived as non-essential, discretionary and low-hanging fruit for “painless” headcount reductions.
How To Fight Back
The key to keeping your ESG job is to be seen as essential – but given the ambiguity of what ESG is, means and how it is quantified make that difficult to do. Although there is a lot of emphasis and hype around linking ESG to a company’s share price, I don’t recommend making that a cornerstone of your approach in this situation. There are simply too many variables in stock pricing to hang your hat on.
Instead, as I have written in the past, you are far better of demonstrating your essential value by
… connecting sustainability/ESG initiatives to cash flow, which is a foundation of corporate value. Cash flow is good; linking it to any ESG initiative is valuable financially and builds credibility within the company. This may not be as exciting as talking about the company’s stock price (what I call “sprinkling ESG fairy dust on shares”), but it is more definitive, and the connection is more direct. It also provides solid defense against ardent opponents of company ESG initiatives… I believe there is not enough attention paid to the importance of revenue/cash flow relative to ESG initiatives.
You can also latch onto key strategic developments in your company or customer requirements that relate to ESG activities/initiatives – new product development, efforts to enter new or adjacent markets, enhancing positions with customers imposing ESG mandates on suppliers.
The point is that the closer and more directly connected you can be seen to revenue, the more essential (and less vulnerable) you will likely be.