90% of DAX companies now have a chief sustainability officer

Nearly every large listed company in Germany now has a chief sustainability officer. According to new research, half of the DAX’s chief sustainability officers also have access to the C-suite, making them more powerful than many of their European counterparts.

A chief sustainability officer (CSO) is an executive tasked with improving sustainability within the company. The role focuses on crafting a sustainability strategy to ensure business practices are in line with ESG and SDG objectives. Aspects of sustainability include community engagement, diversity and corporate social responsibility.

As companies around the world pursue ESG drives, the role of the C-suite in sustainability transformations is more crucial than ever. However, the global majority of companies still do not have active CSOs – instead favouring adding the responsibilities to an existing portfolio.

German businesses, however, are increasingly doing differently, according to a new study from strategy consulting firm Strategy&. Of the 40 companies listed in the DAX – a stock market index consisting of the largest German blue chip companies trading on the Frankfurt Stock Exchange – 36 now have a dedicated chief sustainability officer. That’s 90% of DAX members.

Indicating a major shift in the way companies see the role, 70% of current DAX chief sustainability officers were hired or promoted to their role within the past three years. With companies increasingly witnessing the impacts of climate change, and the risks they generate for business first hand, Strategy& suggests that listed companies may be elevating those responsible for sustainability to more senior positions in response.

While an adverse economic climate in the short term might make this difficult, the long-term impacts of failing to act timely are increasingly seen as more strategically important.

That is not to say that every CSO fulfils the same remit, though. The position with DAX firms varies in terms of seniority and functional role – broadly falling into two categories. Around 45% of DAX companies were defined by Strategy& as ‘CSOs with impact’.  In this case, the CSO is a very senior role, and either CSOs are the CEO themselves, or members of C-suite reporting directly to the CEO.

At the same time, the same number of CSOs are classified as ‘CSO light’, holding more junior positions with a limited mandate – and often without reporting to the CEO.

This means that roughly half of CSOs at least have a direct reporting line to the CEO, significantly strengthening the topic’s influence in the firm. This is an improvement on global figures – but does also leave plenty of room for improvement, if DAX companies are really to maximise the positive impacts a CSO can bring.

Meanwhile, many listed groups are still viewing ESG through the lens of simply complying with regulatory demands – and according to the researchers, this is missing opportunities to improve business performance.

“Many companies are still focusing on meeting regulatory demands. But in light of the scope and scale of the upcoming laws and the urgent need to mitigate climate change, the focus should be on leveraging regulation beyond compliance,” commented Peter Gassmann, the global CEO of Strategy&.

At the same time, there are signs that DAX companies are committed to developing the function in the long term. A majority of 67% told Strategy& that they have promoted their CSO internally – signalling that they prefer candidates who know the company well, and whose talents they can shape in line with the particularities of the business.

Notably, 58% of CSOs were women, suggesting that companies were also tying it to long-term targets for diversity, equity and inclusion.