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“The Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) are part of a new wave of mandatory transparency in the world of more sustainable business. These European Union (EU) regulations provide the rationalization and accountability that the field of corporate sustainability has needed since the founding of the Global Reporting Initiative (GRI) in 1997.

The advent of mandatory corporate sustainability reporting, exemplified by CSRD and CSDDD, provides a powerful argument to return to the years-long debate about how best to define the enterprise function described by the CSRD and CSDDD as “Corporate Sustainability.” This time, enacted law across the 27 EU Member States decisively argues that the function should be consistent with the CSRD framing. That shift is fortuitous: many firms would benefit from revisiting how they describe their management of non-financial business items, and CSRD underlines the necessity.”

So begins SR Inc’s Member Advisory on Defining Corporate Sustainability, one of its latest pieces of best-practice strategic guidance for sustainability professionals looking to lead their fields as they work to align business with life. To get a sneak peek at this Member-only publication, we sat down with CEO Jim Boyle, whose years of advising Fortune 500 and global growth companies on designing a world-class sustainability strategy convinced him the field needed more direction to define the function effectively.

Q: SR Inc has advised its Sustainable Business & Enterprise Roundtable Member-Clients for years to define their function as “Corporate Sustainability.” What is the guidance’s history, and why does it matter?

A: SR Inc outlines considerations for defining the function in the first step, “Vision,” of our proprietary, six-phase strategy management solution. The guidance helps sustainability leaders to put first things first–laying a foundation before building the walls, building the walls before installing the windows, etc. We often see companies tiling the roof when the walls are made of plywood, or laying flooring directly on dirt. Perhaps Vision is commonly undervalued and too frequently underused for “preparation” steps. The first step of that first step is making sure the enterprise defines the function correctly.

Q: This summer, we published a Member Advisory explaining the how and why of that guidance in more depth. Why has this present moment brought that longstanding advice to the fore?

A: This Member Advisory updates and officializes what we’ve said in memos, Member-Client work plans, etc., for a long time. However, an additional layer to why we expanded the idea this year is its intersection with the wave of mandatory reporting. Several of our Member-Clients mentioned their company did not involve them in their company preparations for the European Union’s Corporate Sustainability Reporting Directive or California’s Climate Corporate Data Accountability Act – or that they were invited as an afterthought to a meeting called by Finance or Legal. Often, the ones left out of discussions lead functions like “Corporate Citizenship” or “Environmental, Health, and Safety” – names that may capture (some of) their duties without communicating (especially to outsiders) their importance to designing reporting responses. For individuals leading “Corporate Sustainability” teams, however, their relevance to Corporate Sustainability Reporting Directive responses becomes obvious. Shifting the connection from inferred to explicit increases their ability to deliver the critical perspective their function brings.

That said, responsibility for mandatory reporting compliance is a side effect of properly defining the function, not the goal. The shift’s real motivation is to align the function’s name and scope of work with its original intent: assuring the enterprise’s long-term success.

Q: Why is that approach not currently standard? Why should the two connect more directly?

For better or worse, many treat the sustainability function as a Trojan horse for voluntary environmental or civic action. Energy efficiency and effective waste management are essential to well-run operations; charitable donations and volunteer days are significant to corporate social responsibility plans. But sustainability’s ultimate mandate is not recycling, energy savings, or philanthropy. Instead, sustainability’s mandate is to secure the corporation’s long-term success.

That scope may disappoint some who entered the profession to do environmental or civic good. However, that definition is the most effective way for sustainability to attain the gravitas and respect needed to achieve the profession’s mandate.

Q: You mentioned that some sustainability people may be disappointed at the emphasis on creating value, rather than doing good. For the skeptics out there, why is it so essential to center business success?

Emphasizing long-term value creation, rather than philanthropic or civic endeavors, heightens the function’s gravitas. It also increases resilience when much of the business world is busy attacking anything that remotely resembles neglect of a corporation’s duty to do well financially. By emphasizing that all the enterprise’s stakeholders, not just its shareholders, must be delivered consistent and long-lasting value, it shifts the conversation from “why should the company do this thing to benefit others?” to “why should we do this thing that benefits us?”

Sustainability functions are overtaxed and under-resourced partly because they are often cost centers. By shifting their mandate to the enterprise’s long-term success, they gain the platform to become a strategic partner and thus accomplish more, not only within the realm of sustainability reporting but also in the realm of sustainability action. When sustainability becomes linked to improving margin and market share in a world increasingly wracked by tumult, it gains a seat at CSRD tables and many more tables besides.

Q: Beyond the points in this blog, what does the Member Advisory cover?

Exclusive to SR Inc Member-Clients, this proprietary research piece covers the past, present, and future of the most effective way to define the sustainability function. From its twentieth-century roots, to its present link to mandatory reporting, to its future as securing the enterprise’s long-term success in a woeful world, the Member Advisory examines the what, why, and how of setting the function up for success with proper nomenclature.

Q: So, without spilling beans, how should sustainability leaders define the sustainability function? 

As part of the Vision phase of SR Inc’s annual six-phase strategy management solution, our Strategic Advisory Services team works with Member-Clients to define their sustainability function in a way that works for them.

Our foundational definition is "an approach to business that manages risks and opportunities deriving from social and environmental change to create near-, mid- and long-term stakeholder value in a world facing unprecedented challenges."

Our adjustments from the Dow Jones Sustainability Index’s 1999 definition do three things:

•  Substitute the key concept of “stakeholder” for the word “shareholder.”
• Clarify that Corporate Sustainability best entails an explicit commitment to near-, mid-, and long-term value creation.
• Acknowledge the world and market-changing challenge created by human-caused climate breakdown.

To learn anything more, you’ll need to read the whole piece.

Curious to learn more?

To discover more about this research piece and what other exclusive benefits membership entails, schedule your SBER briefing here.