Sustainability and Clean Tech Meet the ‘Perfect Storm’ as Sector Surges
August 16, 2021 – No one was saying it in so many words, but the report that the United Nations Global Compact and Russell Reynolds Associates released last year was aimed at nothing less than helping to save the world. Six years ago, leaders from 193 nations at an historic UN summit adopted 17 sustainable development goals (SDGs) that involved everything from eradicating hunger to taking urgent action to overcome climate change. They were big, tough, imposing goals, with a deadline of 2030. With but nine years to go, the world remains far from meeting these objectives.
One big reason that progress is lagging is the contrast between what business leaders say about their commitment to sustainability and what they have actually delivered. For example, a previous study showed that 92 percent of CEOs said they believe integration of sustainability will be important to the future success of their business. Yet only 48 percent of chief executives said they were implementing sustainability in their operations. Only 21 percent of CEOs, meanwhile, said they believe that business is playing a critical role in achieving the SDGs.
And when it came to recruitment, Russell Reynolds Associates analyzed close to 4,000 role specifications for senior executive hiring and board appointments for 2019. Fifteen percent of executive and non-executive role specifications referenced sustainability (up from nine percent in 2015), but in only four percent was sustainability experience or mindset an actual requirement for those jobs.
So it was that the United Nations Global Compact, the world’s largest corporate sustainability initiative, and Russell Reynolds Associates joined forces to find out how organizations can make sustainability “core to the DNA” of their leadership teams. In addition to extensive background analysis, 55 “sustainability pioneers” were interviewed in-depth for the report, “Leadership for the Decade of Action.”
Embedding Sustainability into Leadership
And what they had to tell the global compact and the search firm was both compelling and instructive, especially in light of the pandemic health crisis of the past year and a half: “The COVID-19 pandemic is painfully exposing the existing and persisting challenges in our societies and economies as set out by the sustainable development goals,” said the report. “It has made it abundantly clear that there is an urgent need for a new type of business leadership — one that makes the long-term sustainability and resilience of our world a top priority, leaving no one behind.”
“The sustainability pioneers we have studied are amongst the more progressive leaders out there,” said the study. “They have worked hard to drive the synergy between successful business and sustainability. But they also recognize that sustainability is not a destination, but a journey. They understand that they can and must build on the successes they have had to date, but that they should not rest on them. Expectations of CEOs, executives and board members are changing. If the leaders we studied have made one thing abundantly clear, it is that sustainability is a leadership issue and imperative to long-term success and it requires the right mindset and leadership attributes. It starts at the top, but it must become part of the fabric of the organization.”
“CEOs and boards need to be ambitious in driving a new vision for leadership and they need to develop and foster sustainable leaders in their ranks,” said the UN Global Compact-Russell Reynolds report. “This is not a matter of hiring a single individual to own sustainability. The systemic challenges the world faces today mean that sustainable leadership cannot be confined to a small minority; it requires companies to cultivate leadership at all levels. This is not something that can wait, it is not a conversation for tomorrow, it is a conversation for today.”
The sustainability and clean tech sector is now the darling of major private equity and venture capital players, family offices, management consulting behemoths, and wealthy investors seeking to make their mark – and lots of money – on the transformational shift to cleaner, more sustainable living. Among them: Andreessen Horowitz, Khosla Ventures, Bill Gates, Oaktree, Elon Musk, Greentech Capital Advisors, Kleiner Perkins, Jeff Bezos, Clean Energy Venture Fund, and a host of others.
ESG Sector Creates Fastest Growing Search Firm
For executive search firms, all this is good news, and no firm is enjoying the bounty more than Philadelphia-based Hobbs & Towne. Focused exclusively, and deliberately, on the clean tech, mobility, climate technology, food and agriculture, water, infrastructure and sustainability markets, Hobbs & Towne saw a 59 percent growth rate in revenues in 2020 and took first place in the exclusive Hunt Scanlon Media Top 25 rankings as the fastest growing search firm of the year.
Hobbs & Towne Assists Smart Wires in CEO Search
Executive search firm Hobbs & Towne has recruited renewable energy and power industry veteran Peter Wells as the new CEO of Smart Wires in Union City, CA. The company is backed by 3×5 Partners and Lime Rock New Energy. Founding partner and CEO Andy Towne and vice president Tom Watchko led the assignment. “We are thrilled to have Peter Wells joining Smart Wires at this important time for the company,” said Tom Voss, chairman of Smart Wires.
Forecasts provided by the firm show unimpeded growth as far as the eye can see. “Since 1997, we have partnered with mission-driven, forward-thinking investors, companies and people who approach decision-making with an ESG framework to drive disruptive solutions that have global impact on climate and sustainability,” said founding partner and CEO Andy Towne. Among the search firm’s notable recent placements: chief science officer of transformational food and beverage company Impossible Foods; chief people officer of Shoals Technologies; chief technology and innovation officer at National Grid; CEO of innovative electricity technology company Smart Wires; board director at CarbonCure; CFO and head of sustainability at Pivot Bio; CFO at Lightning eMotors; CRO at JustGreens/Aerofarms; chief people officers for Gathered Foods and Homeworks Energy; president of government relations at Gevo; and VP global HR at Hazel Technologies.
Over two decades, Mr. Towne and co-founder Bob Hobbs, along with an expanding group of recruiting colleagues, have led a talent revolution across the space, placing over 2,500 leaders into more than 600 companies globally. Now the firm is turning to a major expansion in financial advisory work, playing off an intimate network to provide strategic introductions and capital raise advice, interim management, restructuring counseling, leadership assessment and executive coaching, and culture consulting through its DE&I platform.
Exciting Time
In the aftermath of the election of Donald J. Trump, who saw climate change restrictions and other regulatory efforts as a hindrance to business growth, Mr. Towne admits to having had feelings of discouragement at one point. “Post-election 2016, the spigot was turned off for about six months,” he recalled. But then came a “circling of the wagons of investors.” With Bill Gates, Vinod Khosla, John Doerr, and any number of long-term, committed climate investors leading the charge, the investment community doubled down, infusing even more capital into the sector, and reviving momentum.
“From 2017 through the election there was this building momentum in the category,” said Mr. Towne. The Administration change, he said, “created the perfect storm.” It was going to happen regardless, he noted, but with the Administration change and the support of government, made it all happen that much quicker. As a result, Hobbs &Towne has enjoyed a 50 percent-plus growth rate in the last five months since Mr. Biden was elected. “What an exciting time this is,” said Mr. Towne.
Among the noteworthy changes in recent months, Hobbs & Towne has seen the very people the firm has worked with over the years – investors, founders of companies, board members – now playing active roles in the new administration.
“For example, HTI placed Jennifer Granholm on the board of Proterra, which is an electric bus company, four years ago. Proterra went public recently. I was speaking with Jennifer about another board role in November and she sent me a text to let me know that she was about to get busy for the next four years. She became President Biden’s pick for Secretary of Energy. Another person is Jigar Shah, the founder of Sun Edison and a co-founder of Generate Capital, and who has done very meaningful investment work. Now he is director of the Department of Energy’s $40 billion Loan Programs Office and will be one of the bigger players in Washington, D.C. helping to develop clean energy technologies. So, government will play a big role. And Administrative support is critical globally as well. If we are going to truly be able to transform industry, we need that push in place from the government.”
Talent in Demand
Currently, Hobbs & Towne is conducting about 30 searches a month. “It’s an incredible pace right now,” said Mr. Towne. “Those searches are a mix of all the roles I just mentioned. It is CEO searches, building out boards of directors, and the C-suites and direct reports of every functional discipline. And there is a lot of specialized advisory work that comes along with those searches. And that is what builds the knowledge base of the category – to be able to go out and represent effectively when you are going out to talk to CFOs that maybe are not familiar with the technology, or they are not familiar with the industry. So more often, than not, they are turning to us for advisory and consulting advice. That is our biggest opportunity ahead, frankly. It is our strength.”
Biggest Challenge Ahead: Managing Growth
Team building is a big part of what Mr. Towne and company deliver for their clients. “It is important for us to build teams that are mission-driven, and that’s part of the fabric of our culture,” he said. “Team building is engrained in us and has been since we founded the firm in 1997.” One of the firm’s top clients going through a massive scale up is a perfect example. Hobbs & Towne has placed the company’s chief executive, board directors, its CFO, a general counsel, and now it is working across the organization’s C-suite and down into direct reports. “We’ve got another 10 searches going with them right now,” said Mr. Towne
Success, as all accomplished business leaders know, brings new challenges. “The biggest challenge for us right now is how fast can we grow. That is No. 1 for us. We have over 20 years of history in the category and we have an unmatched talent network. From that standpoint we are in an excellent leadership position,” said Mr. Towne.
But like any professional services firm, the challenge becomes scale. “We have always grown methodically,” he added. “As founders, Bobby and I have done an exceedingly good job of growing a boutique firm. And now we find our ourselves in the middle of the hottest category on the planet. For us, it is all about making the right decisions on growth and managing our bandwidth.”
Talent Pipelines Struggle to Pace
Tim Conti, managing partner of executive recruitment firm ON Partners, says the burgeoning demand in the sustainability and clean tech sector been driven by several factors. “These include policy, change of presidential administrations, and, I believe, an increasing commitment among executives toward positive climate impact,” he said. “All of these elements create a great growth trajectory for the space; market conditions are there now to attract the highest caliber candidates. When you can mesh high caliber leaders with mission-driven companies, great things tend to result.”
The CEO and CFO-level roles have been On Partners’ biggest focus for searches across the sector. “With the market potential, several companies have chosen to upgrade the CEO, attempting to boost strategic thinking in order to create a differentiated positioning for the company,” said Mr. Conti. “And, with financing often serving as the foundation for these companies, the CFO role is now (and has been) critical to a company’s ability to capitalize on market opportunities.”
Given the demand, talent pipelines are expected to struggle to keep up. But in these moments, companies should also look internally at talent already within its ranks, talent that is often times untapped, added Mr. Conti. “Providing growth opportunities to your highest potential employees can serve as an accelerator for their career development and oftentimes solves for your leadership gap without the disruption and risk of integrating an external leader.” A hybrid internal/external talent strategy is called for in a growth market such as this,” he said.
Grid Parity
At San Francisco-based SPMB Executive Search, meanwhile, Todd Greenhalgh, partner in charge of the firm’s innovation and sustainability practice, and Madison Kempf, director, innovation, and sustainability, said that a number of factors have contributed to the recent surge in clean technology, energy and sustainability recruiting. “No. 1, grid parity has been achieved – meaning that the true cost of renewable energy is equal to or less than the fossil counterparts,” they said. “This is a result of large-scale commercialization and years of production of improved solar technologies, higher output wind turbines and better storage technologies.” Transmission, distribution, smart grid, new inverters and the advent of AI and machine learning have all advanced dramatically as well and, thus, propelled growth significantly. “But this is actually not new or even recent; it has taken the better part of the last two decades to achieve,” they noted.
New Challenges Ahead for Renewable Energy, Clean-Tech and Sustainability Sector Leaders
Over the last decade, clean technology, solar and electric energy, and sustainability have moved from the periphery to the center of the global economy. Established and emerging companies, along with private equity and venture capital firms, are making massive investments across the field as they stake out expanding areas of the market.
In addition, no compromise electric vehicles are making their mark. “Tesla has proven EVs are cool,” said Mr. Greenhalgh and Ms. Kempf. “Porsche, BMW, VW and every major automotive manufacturer has put some amazing models on the road. Buses, trucks, last mile transport and even E-bikes are now incredibly capable electric vehicles.”
Capital Flow
What’s more, the investment in technologies accelerated under the Obama administration and now under President Biden have produced results, the SPMB recruiters said. That, combined with the U.S. recommitting to the Paris climate agreement and the President’s pledge to cut America’s climate warming emissions in half by 2030 is driving massive amounts of funding and innovation into clean tech.
Related: Skills Gap Points to Why We Need to Invest in People
“But perhaps most important – capital flow and liquidity are at an all-time high,” said Mr. Greenhalgh and Ms. Kempf. “With IPOs, SPACs and acquisitions dominating headlines, the need for experienced executives in this space who can drive these outcomes is greater than ever.”
Top-level leaders are in great demand, the SPMB recruiters said. “It always starts with the CEO and/or founder, because leadership is the key,” they noted. “When thinking about asset-heavy businesses there are three fundamental pillars that are required for businesses to succeed: Financing –the ability to raise money to complete these projects has never been more plentiful; sales and/or origination – the ability to find projects that need financing; and operations – the ability to scale the projects.
As a result, sales, operations, and finance leaders are most in demand – with financial leaders being the scarcest and, therefore, most challenging roles to fill. As the technology industry continues to experience explosive growth within the private and public markets, IPO-ready finance leaders will be in especially high demand.
A Sea Change
Scott Atkinson, a managing partner at Heidrick & Struggles, pointed out that the sector has been growing for some time. “Well before the Biden administration announced the details of their infrastructure plan and its ties to green and sustainable initiatives, we were witnessing growth all across the sector,” he said. “As companies were re-examining their own carbon footprints and seeking counsel from – and in many cases seeking to hire – sustainability experts, there was the sense that a sea of change was upon us.”
There has been increasing demand for chief sustainability officers across numerous industries, said Mr. Atkinson, but the pool of talented people in these roles is limited. And, he said, that demand at the C-suite and executive level will continue as the sector accelerates: “Existing chief sustainability officers will be part of this demand, but we also expect companies will look inward to fill this role,” he noted. The chief sustainability officer position is so new within corporate America that the skills and requirements are unclear within many companies. “In turn, we are witnessing CEOs and boards fill the role with someone who has their trust and influence within the organization – as well as the agility to handle the dynamic nature of an evolving role,” said Mr. Atkinson.
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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
