The professional stretch required for the sustainability-to-ESG crossover
Sustainability and ESG professionals are often conflated, but skillsets and motivations are not necessarily the same.
I’m noticing more content describing the particular nuances between sustainability and ESG. This is good. We shouldn’t get these concepts twisted (see table below).
But what interests me more, is the difference in skill set and in outlook between sustainability professionals and ESG experts. Often the Sustainability team and the ESG team are one team who does both functions. What happens when the Sustainability do-gooders are thrown together with the ESG quants to meet the moment of rising regulations and stakeholder expectations?
The difference between Sustainability and ESG
Sustainability Professionals
Sustainability has been an official concept since 1987 and over time organizational sustainability programs have emerged, evolved and matured differentiated by sector. I’ve had the pleasure of meeting hundreds of sustainability professionals in my career with a diverse set of educational and career backgrounds.
I’ve noted that the most effective sustainability professionals learn quickly, are highly capable generalists who excel at communication, build cross-functional teams and succeed at change management. They may have a particular area of expertise in policy, management, environmental science, waste, water, energy or engineering, or they may not. Younger sustainability professionals are more likely to have a degree with the word sustainability in it. More senior professionals most likely do not because the academic credentials are only more recently becoming more common.
ESG Professionals
The term ESG first appeared in 2004 in the United Nations Global Compact and has found footing first in the investment field and more recently in financial regulations in some countries.
So, it is no surprise that ESG is attracting professionals with financial and accounting backgrounds. Now that ESG metrics are moving from something desired by investors to something required by regulators, more accountant and internal audit professionals are moving into the field. With financial backgrounds and experience in process, controls, audit and verification, they have a lot to contribute to the quantification and verification of environmental, social and governance metrics and disclosures.
Also, because ESG is about reducing risk and about disclosing the inner workings of a company, experts may also have a legal background focused on protecting the company from disclosing too much, too little, too soon or too late.
In fact, there is a new and fast-growing role in companies of the ‘ESG Controller’. Google it and you’ll see a slew of financial publications advising companies to create this new role ASAP.
We need a unicorn but what we have are two workhorses
A statistically insignificant LinkedIn search tells me that companies hiring for an ESG Controller are looking for experts with a decade of experience in both financial reporting, ESG reporting, sustainability standards and frameworks, SOX controls, master's in finance or business and relevant CPA credentials and GHG accounting skills. In effect, a unicorn.
The reality is it will take years for sustainability professionals to up-skill on accounting and financial controls. And it will take just as long for financial and legal experts to understand sustainability programs, frameworks and reporting. That means companies will need to use the existing experts and bring them together to meet rising expectations and new regulations for sustainability and ESG due diligence and disclosures.
What does this look like on-the-ground? The moment of disbelief when the accountants grasp just how much of the 3rd party verified Greenhouse Gas Inventory is an engineering estimate. Or when they are inflamed upon realization that Scope 3 emissions are double, triple, quadruple counted infinitum. These things are normal for sustainability folks, but they are mind blowing for the finance team.
It might look like the sticker shock when the sustainability team realizes the new software required to meet the expectations for SOX controls for environmental data. Or the friction of the time and resources needed for audits and verification of previously voluntary disclosures.
Less describable are the differences in outlook and motivation that must merge. Sustainability professionals tend to be generative. They are often asking, “how can we do more good things?” ESG professionals are likely risk avoidant. They ask, “How can we reduce risks and comply with what is required without doing more than is required?”
I think great care is needed to help new teams get oriented to a shared purpose.
Bridging the Gap
I started my career in sustainability and over time transitioned to working on both sustainability and ESG. It was very helpful for me to take the time to understand divergent perspectives and purposes of sustainability and ESG.
My hodge podge of an academic and career background has served me well for many years, but more recently I’ve prioritized on-the-job learning and external training and certifications on some of the more technical aspects of ESG:
Credentials in Sustainable Accounting, Climate Risk and Carbon Accounting.
Understanding internal audit and how they conduct due diligence, set up process and controls and conduct audits.
Unpacking investor ESG methodologies and how disclosures relate to valuation.
Learning how the financial teams conduct reporting.
Getting to know how risk management and due diligence is handled to make ESG efforts congruent.
Personally, I like to think of engaging in now-mandatory ESG as a gateway for other functions to become more involved in generative sustainability. And that by flexing our ESG skills, sustainability professionals become even more prepared to make the business case for the long-term systemic change we know is required.
Let me know your thoughts in the chat:
Hi Jenita!
First, Congrats on your new role as Cuyahoga's Chief of Staff for Climate and Sustainability! As a civic leader and, may I say, former sustainability generalist, who has gone more in-depth with ESG and other sustainability accounting metrics, you have done amazing work for the City of Cleveland, NEORSD, Eaton, and now we can't wait for your impact on the county at large!
You have been in the sustainability leadership positions long enough to know that, yes, the 'unicorn' staff is hard to find, if not non-existent. Other than in perhaps CEO positions or the like, who are ultimately responsible for financial bottom lines, the company's marketing and vision direction, and risk aversion/sustainability of sustainability minded companies. These companies can be smaller- mom & pop or local companies, like Rust Belt Riders and Rid-All to national and global distribution companies like Patagonia, Seventh Generation, and Dr. Bronners, who are disruptors or game-changers in their sectors of waste management, textile, or home goods. These professionals combine the know-how of many specialists and sustainability generalist, combined with practical leadership to create the 'unicorn'.
In the staff aspect, staff are often hired to do specific jobs-- just finances, just reporting, just engineering, etc. Yes, each can be trained on 'do less harm' ratings, like ESG for businesses, STARS for Universities, HERS or LEED for builders and cities, but we all know many of these rating's top ratings fall short of 'true sustainability', which, in short, is doing things in a way that can last 10+ generations.
So alas, as a Sustainability Professional Leader, you have a challenge of balancing the 'status quo' sustainability and climate goals of current rating systems of your industry, vs. 'true sustainability'. And you get to decide if 'true sustainability' is financially feasible, socially feasible, and a real or practical engineered solution. Secondly, if true sustainability is not attainable, you get to identify, campaign, then track the best practical, most sustainable solutions, beyond ESG or other metrics.
I agree with you, ESG is a gateway for certain functions to be more sustainable. It helps create the internal skill sets and mindsets to become more 'true sustainability'. As a leader, once you implement and promote staff to become more familiar with sustainability rating systems, it is then your job to take it a step further. Because without getting into too much detail, we (in the true/scientific & holistic/triple bottom line sustainability field) all know that the GHG emissions reduction standards for example, is not going to solve Climate Change completely and in many cases not enough in a meaningful way. We also know that adding diversity in your staff, doesn't mean your institution is not participating in an exploitive system. Or access to healthcare, doesn't mean you as an institution stopped or addressed core systems that actually cause or are known to help cause certain health problems, such as depression, obesity, and cancers.
Regarding the 'ESG Controller', citizens and consumers need to be wary of any institution that employs this type of position. It's basically an ESG professional, with an extra legal lens and enough experience, to help mitigate lawsuits/risk. Its not meant to optimize sustainability; other than to optimize the longevity of company that is not-so sustainability principled. So, this type of professional leans more towards the greenwashing end, than a true sustainability professional.
In conclusion, I hope leaders like you are able to keep, 'bridging the gap' between traditional roles and the sustainability skillsets in each of the respective areas. I hope you and others like you in leadership positions are able to keep learning and networking to find the industry's, 'best practices' in 'true sustainability'. And noting, as a 'global sustainability' specialist who in practicality, works to implement more city, county, state, national and school/university level solutions, true sustainability looks different for a city vs. a rural county or town, but hopefully collectively we can continue to report, account for, and work towards the balance of 'true sustainability'.