Correlations Between Executive Search and Sustainability
November 7, 2022 – Sustainability acts as an umbrella term for companies and organizations focused on advancing social and environmental impact initiatives. Organizations are looking to implement transformational change and forward their sustainability/ESG agenda. These changemakers have provided insights on the ever-evolving nature of the sustainability executive search market, and its importance within the U.S. market in a new report from Tempting Talent‘s Lauren Falconer, sustainability practice lead. “A sustainability revolution is sweeping across the business landscape,” the report said. “Companies must evolve to ensure that they are driving purpose-driven, value-based change. Inaction risks reputational damage and the possibility of extinction in the long run. What was once a nice-to-have is now a must have.”
There is a burgeoning need for professionals focused on sustainability, according to recruiters. “Companies now recognize the importance of implementing ESG strategies to meet key business challenges,” the Tempting Talent report said. “Purpose is now profitable. Businesses that strive to meet the triple bottom line have seen an increase in external investments and significant improvements in their long-term operational efficiencies. The status quo is no longer acceptable.”
Sustainability markets are also surging. Bloomberg Intelligence projects the value of global sustainability assets to be $53 trillion by 2025. This is also equal to more than one-third of the estimated $140.5 trillion in assets under management. Sustainable investments are seeing returns far superior to non-sustainable counterparts. Indeed, BlackRock says that 81 percent of sustainable indices outperformed their peer benchmarks in 2020.
Within the U.S., executive orders signed by President Joe Biden have also positioned climate change at the heart of U.S. federal policy. His landmark climate bill is an effective way to boost jobs and secure a prosperous future for the U.S. economy. Business leaders will feel the socio-political butterfly effect of such legislation. Proactive change is essential for the U.S. economy to remain competitive globally, and it falls upon business leaders to navigate the changing tide.
“Given this backdrop, there is an unprecedented need for executive teams who can keep up with these changes and smoothly charter a path towards significant and meaningful change,” the Tempting Talent report said. “This is where executive search firms have excelled and flourished. Leadership is key to change, and executive search firms hold the keys to such leadership.”
The Role of Executive Search in the “Sustainability Revolution”
“ESG is attractive and companies want to capitalize on the positive market effects and hiring effects,” said Will Shannon, co-founder at Shanrock Partners. “It’s a huge advantage to have the ability to demonstrate environmental sustainability, diversity on your teams and social responsibility. As with any big wave that goes through a market, the ripple effect means that either you are first to market, or you fall behind. It is important for companies to be able to measure their impact and have talent that can build out proprietary or third-party models that can be translated into business or capital raising success. Business leaders need to be able to communicate to stakeholders that this is not just a stamp on their pitch deck, but that they are actually going out and doing good.”
Mr. Shannon addresses the “sustainable rebirth” taking place within the U.S. business landscape. He muses on what is now required and expected from business leaders. There is a glaring need for tangible and measurable results across the private, public and civil society sectors, he says. The sustainability agenda has been injected with a fresh sense of urgency. Business leaders, according to Mr. Shannon, “need to produce an actual impact and create measurable sustainable change over the years” if they are to stay afloat.
Search firms have observed and adapted to sustainability’s increasing influence in the corporate landscape. Heidrick & Struggles established a global sustainability practice in 2019. However, Scott Atkinson, co-head of that practice, affirms that sustainability is a “full-firm effort.” He said Heidrick aims “to embed sustainability and ESG into the global economy through all our service offerings.” This wide-reaching approach to ESG and sustainability demonstrates how it has been infused into the bloodstream of the business world, stretching across many industries and functions, according to the Tempting Talent report.
Steve Kyryk, partner at True Search, mirrored Mr. Atkinson’s sentiments when he said search firms “don’t push sustainability, rather, sustainability pulls us.” Search firms are proactively molding their services to serve the “sustainability revolution.” This introduces a new facet to the search profession. Executive recruiters are now required to have a deep understanding of the ESG/sustainability landscape. This is essential if they are to identify the most qualified executives for these roles. Search professionals are delivering a solution that will benefit not only their client, but also society. “You can have the best strategy and best idea on the planet, but without the right leaders in place we can’t move forward with the vision of embedding sustainability and ESG within the global economy,” said Mr. Atkinson.
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Executive search firms are trusted by their clients to source and assess top leadership candidates. Dawn Dzurilla, founder at Gaia Human Capital Consultants, shared the first steps she takes when kicking-off a search. “We bring all the stakeholders together so that we can understand their business and the gravity of what they are trying to accomplish,” she said. “This approach allows executive recruiters to execute on searches efficiently, effectively, and purposefully.”
The Evolution of Sustainability Executive Search
Executive search for the sustainability leaders has undergone massive transformations over the past decade. The rise of the chief sustainability officer is key to understanding this metamorphosis. In 2021, Weinreb Group conducted an extensive report on “The rise of ESG in the C-suite”. This report delineated how, in just 10 years, the CSO position grew by more than 228 percent at U.S. publicly traded companies. It rose from 29 CSOs in 2011 to 95 CSOs in 2021.
Executive Recruiters Enjoying Best Run in Over 20 Years
In its compensation report, Tempting Talent shows that total compensation in the search industry is way up. The main reason is performance-based pay. A rise in fees has played a role, as has collaboration with the PE and VC community. It is another cause for optimism about executive recruiting.
Ellen Weinreb, founder of Weinreb Group, explains that the exponential rise of the CSO stems from an increasing need for transparency and accountability when it comes to sustainability reporting. “Reporting on sustainability used to be 50 percent of someone’s full time job,” she said. “Now there are usually multiple people working on reporting. There are numerous requirements, regulations, ratings, and rankings; navigating that takes a few people, and businesses are looking for expertise in leadership and in hiring.”
“Executive search firms specializing in sustainability as a function have flourished in tandem with the growing need for businesses to provide reliable ESG-related disclosures,” the Tempting Talent report said. “Yet, while CSOs are central to the implementation and measurability of transformational change within many companies, the board and other members of the C-suite must also take responsibility.”
In the current economy, value creation runs hand in hand with a company’s business strategy for sustainability, according to the report. This inescapable symbiosis means that the sustainability agenda is not something that can be overlooked by CEOs and boards. Certainly, as Mr. Atkinson said, “Investors are putting pressure on CEOs and boards to think through how ESG intertwines into governance charters.”
A survey conducted by Egon Zehnder said that 66 percent of employees feel that it is the CEO of their company who “owns” the sustainability agenda. Eighty-two percent believe their boards are well-equipped to monitor sustainability threats and opportunities. Only nine percent said that the chief sustainability officer “owns” the sustainability agenda. However, when asked who “leads” sustainable transformation at their company, 60 percent cited the CSO.
This data demonstrates the interdependency between executive teams and corporate sustainability. But what role do executive search firms play?
“Search firms are the engines that put changemakers to work,” said Ms. Weinrab. Exceptional executive-level talent is crucial in the sustainability equation. Executive search firms are becoming increasingly adept at sourcing C-level and board candidates who have a track record in ESG and who can provide purpose-led leadership. “The sustainability function is going from being opportunistically hired from within businesses, to being professionally hired from outside,” said Mr. Atkinson.
However, difficulties can arise when searching for candidates with specialist experience. In today’s candidate-driven market, the principles of supply and demand have been driving wages up for candidates with hard technical skills, especially within sustainability industries such as climate tech. This is a point emphasized by Mr. Kyryk. “At True, we have a process we like to follow to make sure we capture everyone in the market, but we are now recommending that our clients move quickly,” he said. “All the ideal candidates are receiving a lot of phone calls and getting multiple offers; there’s a lot of competition. If you want to bring someone in successfully, you have to move quickly and efficiently.”
Shortages in the Market
“In relation to the U.S. recruitment market, there are currently more opportunities in cleantech than there are people to fill those positions,” said Matthew Cohen, practice leader of energy and sustainability at Direct Recruiters. “Clients are still looking for people with industry specific experience and knowledge. From the work we have conducted in the market, we feel that clients should think about other areas and industries where candidates’ experience is applicable to the roles they are hiring for. Companies need to think about ways they can implement training and a robust infrastructure to support people transitioning into the sustainability world. As the demand to fill roles in cleantech increases, companies must adapt and develop. They must understand that considering people from alternate industries is key to tackling and overcoming the shortage in the market.”
Mr. Kyryk agreed that it was possible for companies to “recruit tangentially.” However, Mr. Kyryk did stress that “it’s hard to replace experience during searches for highly skilled candidates within niche sustainability sectors.”
Flourishing sustainability markets have been fueling the demand for talent with green skills, according to the Tempting Talent report. Within the U.S., millions of new jobs have been created to help deliver a successful green transition. Indeed, LinkedIn’s 2022 Global Green Skills Report shows that in the last five years, the number of renewables and environment jobs in the U.S. has increased by 237 percent. The percentage of people with the knowledge and skills needed for environmental sustainability is also on the rise. In fact, LinkedIn’s report shows that the average job in the U.S. uses three times more green skills than the average job globally. This highlights how imperative it is for executive recruiters working the U.S. market to source resilient green talent that can deliver real change.
“Sustainability, both as an industry and as a function, will continue to expand throughout businesses and organizations globally,” the Tempting Talent report said. “The U.S. market is leading the way in this revolution, and many executive search firms have positioned themselves at the forefront of this change.”
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Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
