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Does every board need a Chief Sustainability Officer?

As regulations become stricter, carbon future prices skyrocket, and proactive corporate sustainability becomes a competitive advantage, is it time to start considering whether every board needs a Chief Sustainability Officer?

6 minutes read

Professor Dr. Julia Hartmann

Professor of Management and Sustainability at EBS Universität für Wirtschaft und Recht

Insight from Prof. Dr. Julia Hartmann

Julia Hartmann is Professor of Management and Sustainability at EBS University of Business and Law. Her research focuses on sustainable development, corporate social responsibility, sustainable supply chain management and operations. Her research has been accepted for publication in the Journal of Operations Management, Journal of Business Ethics, Journal of World Business, International Journal of Operations and Production Management, and Journal of Cleaner Production. Julia Hartmann has received several awards, including the EBS Upcoming Scholar of 2011 Award and the EBS Students' Award for Excellence in Teaching in 2012. Julia Hartmann received her PhD in Supply Chain Management in 2008 and granted professorship in Economics in 2014.

The importance of supply chain management

1. Julia, your research focuses on sustainable development and sustainable supply chain management. What is supply chain management and why does it play a crucial role in terms of sustainability?

Most companies define the supply chain internally. The internal supply chain includes everything that arrives at the incoming goods warehouse as well as all goods that are shipped to the customer. But actually the supply chain includes much more, namely all production stages that are upstream and thus everything that already happens before the goods material even arrives at the goods intake. In the production of a T-shirt, for example, it concerns the entire process from the production of spandex and cotton, to the dyes, to the actual weaving, cutting, and sewing together.

The supply chain is of particular importance for the issue of sustainability: companies have outsourced more and more production steps in the course of globalization. As a result of this value creation outsourcing, much of the social and environmental impact also takes place outside the company. Since different standards and laws apply in these countries, companies that benefit from global value chains must also keep ecological issues in mind.

Tackling supply chain transparency

Urban landscape

2. What is the particular challenge in reducing emissions in the supply chain?

There are two major problem areas: One is transparency, and the other is control. The two are related, because supply chains have grown historically.

Companies that have decided to outsource a certain part of their production not only lose the know-how of manufacturing the part themselves, but their suppliers also find other suppliers. The transparency problem arises exactly at this point, because many companies have a contractual relationship with the direct suppliers, but do not know the downstream suppliers.

The second problem of control is directly related to this: Low transparency also means low control in the area of human rights compliance and emissions reduction. Both problems have been brought to the attention of companies by the Supply Chain Act.

Finding solutions for better sustainability

3. What are the solutions to these problems?

A crucial part of the solution is actually digitization, because this allows information to be presented in real time. Suppose you were to ask suppliers about environmental and labor conditions and want to know who their subcontractors are, the result would always be a snapshot. However, supply chains are not static, they are constantly in flux. There are many changes and failures of suppliers. Digitization helps tremendously here, because there is no need to query all the changes, but the stakeholders throughout a supply chain are connected through a technology, mostly blockchain. Whenever something changes in the supply chain, all participants automatically have the information in real time.

The second important topic is the creation of incentives so that as many companies as possible enter this digital environment. For example, many companies are worried about releasing information about themselves because they fear for their competitive advantage. Procurement enterprises can incentivize by offering a long-term contract. They can also invest in the supply chain and help other stakeholders participate in a sustainable supply chain by helping to address social or environmental issues. This issue is particularly about building trust and providing economic incentives.

Sustainability as a competitive advantage

4. Many companies have already recognized that sustainability will also be a competitive advantage in the future. Nevertheless, some are finding it difficult. Is it important for companies to have a central position for this, the Chief Sustainability Officer (CSO)?

It's true that the issue of sustainability generates additional costs and work. And, of course, it’s important to have a resource to provide more information on this. When a company initially addresses the issue of sustainability, it often runs the risk of leaving the problem to the CSO alone. However, sustainability has to play a role everywhere in the company in order to be implemented. It cannot be the responsibility of one person to collect the numbers and then make suggestions for improvement. If these suggestions are then not implemented because the division managers are not committed, then frustration quickly sets in. I believe it is important that a company makes a decision for itself as a whole and sees a long-term opportunity to establish itself as a player in the market.

Personally, for example, I am convinced that sustainability will be an absolute standard in 10 years' time. And then it has to be integrated as part of the strategy that helps to define targets and KPIs. Each individual must also have a responsibility in their area to ensure that certain environmental and social goals are achieved. A CSO should, of course, bundle these goals in order to inform customers when reporting, but it is important that sustainability runs through the entire company.