Mind the Gap: Navigating the Sustainability Talent Market
As we race into 2022, keen to put into action the commitments and pledges made in Glasgow alongside organisational sustainability objectives, one of the biggest challenges the recruitment industry faces is that of talent. Demand is already outstripping supply and the gap is growing by the day.
Over the last 24 months the recruitment industry has witnessed an explosion in interest and demand in all areas of sustainability across all sectors. The cumulative effect of global political focus, investor attention, consumer interest and regulation underpinned by a purpose greater than profit (the survival of planet Earth) has propelled sustainability from the periphery to the board room.
For decades, seen as at best a compliance cost and at worst not acknowledged at all, sustainability has historically been a minority profession dominated by environmentalists and CSR professionals. With minimal demand from business, the talent pool has remained small, and skill sets limited.
Almost overnight, from a low talent base, the recruitment industry witnessed unprecedented demand for employees with skills and experience across the sustainability agenda. According to Deloitte’s CFO survey, this looks set to continue as a record number of CFOs rate increasing capital investment as a strong priority for their business during 2022, citing the climate transition as one of the main drivers of this. The survey also reveals that CFOs rate labour shortages as the greatest risk to business with climate change the number 3 risk. This has and will continue to give rise to some interesting market dynamics and challenges.
Currently the market is for the most part immature and fragmented as organisations grapple with new targets, reporting demands, concepts and language. Consistent with exponential demand increases of this type, the consultancies lead the charge, as organisations lean heavily on external support in the early days. The recruitment industry witnessed almost all consultancies growing teams very quickly, with acquisitions at an all-time high and new players entering the market. A case in point is PwC’s recent announcement of plans to hire 100,000 ESG related roles globally over the next 5 years. The anticipation is that this trend will continue for the next 3-5 years with the balance gradually moving back to more in-house roles as organisations understand, budget and recruit their own capability.
The recruitment industry has also seen an increase in the variety of skills required, from responsible investing to natural capital, climate risk to human rights, biodiversity to climate economics as well as new reporting frameworks, standards and regulations and job titles which are fast evolving. This evolution can create confusion. New taxonomy, definitions, interpretations and understanding with little standardisation across the market makes it a difficult landscape to navigate.
It seems also that the narrative is moving beyond climate to biodiversity and areas such as natural capital, which was a clear thread through COP26. Likewise, the intersection of sustainability and technology is giving rise to innovation as tech start-ups, as well as established consultancies, join the race to develop new technology that can help solve a range of ESG problems from decarbonising the value chain to measuring the value of nature. In the financial services sector there continues to be a substantial shift towards sustainable investing and related ESG products which require skill sets and knowledge not previously prevalent in the sector.
This surge in demand has quickly revealed huge gaps in the talent market in a number of key areas:
1. Entry level
This area is the least affected as increases in university courses and a generation looking for greater purpose in their careers has swelled interest and numbers at the junior end. A lot of this is still to filter through to the workplace, but graduate schemes are competitive and there's no significant supply problem at this level.
However, the emergence of a new generation of professionally qualified sustainability professionals does bring an interesting dynamic to market. By and large the role of the sustainability professional has been as a generalist, but as the market matures, and roles become more complex, there is a demand for discreet specialist roles. It is easy to see this trend continuing which begs the question will there be a role for the sustainability generalist in the future? It is likely that sustainability will be seen as a collection of specialist disciplines pulled together by the CSO.
With a limited talent pool with 4-10 years of relevant experience this part of the market is being stretched both for technical capability and management roles in the ever-growing teams. This level is experiencing opportunity and leverage that has never before been seen in the market. This has resulted in considerable wage inflation, multiple job offers, counter offers and promotions. Candidates have more options than ever before within consultancies of all sizes, industry (especially FS where salaries are usually higher) and new start-up ventures. In recent months there have been overnight salary increases of between 7-20%, early promotions and offers of equity to retain staff as organisations realise the competitiveness of the market and the value of these skillsets. It is far cheaper and easier to try to retain an employee than to recruit a replacement.
This is an area of concern for many organisations as the talent pool at this level is small making the gaps more obvious. Given the importance of robust leadership to drive change, this has the potential to limit the growth and effectiveness of sustainability within organisations.
Worryingly there are still relatively few leadership roles pitched at a senior level within organisations. Often the role of “Head of ESG” or “CSO” is given to someone in a mid-senior management role with limited or no exec or board level engagement making it difficult to have the necessary influence or impact. This is often compounded by the reporting structure, with sustainability frequently reporting to marketing/comms/investor relations, and not integrated into a reporting line such as strategy where it can be an integral part of corporate strategy.
4. Board Level
Climate change is fast becoming the most important conversation in the boardroom and demands courageous leadership. It is absolutely central to any business that wants to thrive beyond the short-term. Boards have astonishingly little representation or understanding of ESG issues, in fact last year’s TSBR report on ESG preparedness of corporate Board of Directors in the world’s 100 largest listed companies found that only 17% of Directors on relevant sustainability committees are ESG competent.
There are few individuals with both the subject matter expertise and business skills to educate and influence board level decision makers to properly embed sustainability in corporate strategy, realise not only risks, but opportunities and move sustainability to a business-as-usual activity.
In a recent survey by Heidrick & Struggles 85% of respondents said that their board needs to increase its climate knowledge, 46% said their board has insufficient or no knowledge of climate change’s implications for financial performance, and almost half said that climate change is not at all or only slightly integrated in the company’s investment decisions.
At first glance it may seem that corporate boards lack appetite or are paying lip service to climate change, but a more likely explanation is that many directors are overwhelmed by the scale and complexity of their ESG responsibilities. It could be seen as an interpretation that most boards are caught in a vicious circle whereby people who understand the implications of climate change and how to address them typically lack the business experience traditionally required to join a board, and people with board relevant business experience do not know as much as they would like to about the long-term business implications of climate change.
At all levels, in order to plug the gaps, many employees are given ESG responsibilities alongside existing roles or pivoting completely to an ESG role with limited background or experience in the field. While this is well-intentioned and often the only immediate solution it does present potential challenges in the medium term.
This pace of growth will inevitably create gaps. The ability to grow and deliver on ESG objectives is already being limited by the availability of talent, so what can organisations do?
There is a lot of benefit to be gained from concentrating talent that can advise many businesses. The consultancies are where a lot of the knowledge, innovation and thought leadership is currently housed, a rich resource that has visibility of practice good and bad across a range of organisations. This can be very powerful in driving change however it is important that organisations reinforce this with their own plans and capabilities to embed the change.
2. Short-term contracts
There is a reasonable pool of senior independent consultants who can provide short-term advisory services which can be valuable for discreet projects, education, or to kick start change programmes.
3. International talent pool
We will need to look beyond the borders of our own country, in this age of remote working we must have a global talent solution to this global crisis. With recent changes to UK visa rules, there are new talent markets open to UK employers, although few seem to be currently utilising this route.
A range of new courses and qualifications are available with popular ones including courses through the Cambridge Institute for Sustainability Leadership (CISL) the CFA certificate in ESG investing and the GARP climate risk certificate, all of which can help upskill existing employees.
It is essential that every employee regardless of role plays their part, but we must be careful which roles we give to which people. You wouldn’t upskill a marketeer to do your accounts or an IT specialist to provide legal advice, yes sustainability needs to be part of everyone’s role, woven into the fabric and identity of every organisation, at the forefront of every decision taken, but it needs to be led by experts, a team of specialists in the many, varied and evolving fields across the ESG spectrum.
5. Role of the non-exec
It is time to balance traditional board qualifications with new knowledge and mindsets. Making climate change part of your board’s competency matrix is the first step, but if suitable executive talent is not available, there is an important role for the non-executive to provide the education, insight and guidance to help frame board level decisions in the context of ESG.
6. Recruitment partners
More than ever internal talent teams will benefit from partnering with specialist providers who understand the range of skills required and can access candidates in a hyper-competitive market.
Simply put, the realisation of organisational, governmental and global climate change objectives, is dependent on the availability of qualified talent. Without the right people in the right place for the right reasons, organisations will not be able to effect change. We already have a supply shortage, and this is likely to continue particularly at management and leadership levels.
We also know that over the last few years there has been a shift in customer and employee priorities, and it is eminently clear that organisations must be able to demonstrate purpose beyond profit to attract and retain both talent and customers. Indeed PwC’s 25th Annual CEO Survey shows UK CEOs are now recognising the growing importance of connecting purpose to business strategy, and having demonstrable ESG credentials to attract the talent, customers and investment they need for growth.
Time is limited for organisations that do not adapt, but as you do, please mind the gap.
Based on research published in March 2022 by IAC, a global recruitment specialist dedicated to audit, risk, compliance and sustainability.