Andrea Zanon believes that Businesses, particularly start-ups should hire a Chief Impact Officer
No matter where you stand in the political or value ranks, I believe we are in the middle of a revolution across the business and policy circle and I am going to argue that hiring a Chief Impact Officer (CIO) will help your company stay competitive, attract top talent, and generate long term corporate and societal value.
The revolution I am talking about today is the Environmental, Social and Governance (E-S-G) as this encompasses key priorities of business opportunity going forward. Even if you are not a believer of the accelerating climate and social movement, I am going to argue why it makes good business sense to allocate or re-allocate some resources to ensure you have the in-house expertise to be part of the “high impact” disrupting business and societal trend. I highlighted the S and G as this is where we believe the biggest opportunities are.
The ESG movement often also confused for the sustainability and impact investing is an emerging investment movement and similarly to the decentralized finance (DEFI) will revolutionize our economies and the way we live. While DEFI is trending among risk takers, tech early adopters and social media fans. On the other hand ESG is a priority by socially and environmentally active individuals, university endowments and now also asset managers. Just to give you some financial data on ESG, about 59% of individual investors in 2022 expect to buy or sell holdings based on sustainability indicators. Bloomberg anticipates that by 2025 we will have 50 trillion US$ in investments. In our view by 2025, 100% of AUM will incorporate some ESG factors. On the consumer side, all kind of surveys show that over 50% of consumer choices are based on sustainability and broader ESG considerations.
Having said that, here are key benefits of hiring a CIO:
Marketing: Businesses that prioritizes ESG will be automatically identified as “compliant” and therefore well positioned to gain the trust of consumers that buys product and services that are socially and environmentally friendly. This C level suit officer makes sure that marketing is aligned with broader society engagement goals while ensuring the company limits risk of green washing with potential legal cost and consequences. It is critical that the ESG and/or sustainability/purpose focus of the company are backed up by concrete corporate action.
Talent Acquisition: Recent survey confirm that young top talent seeks to work with companies that have long term environmental and social contract, i.e. a strong commitment to improve society and the global environment. These tend to be younger in age and seek to work to create benefit for shareholders but also the broader community of stakeholders. This is like having a CSR officer but with real skin in the game.
Team First: Among the key impact objectives of the CIO job, is to ensure that internal coaching and performance maximization is prioritized. To address this, companies normally hire an external coaching and conflict resolution team to ensure that internal conflict are prevented, and HR risk reduced. To have real team performance and happiness improved while reducing costs, corporations need an in-house expert that can help build the team impact culture day in and day out. Think of the Wendy Roades, the woman CIO performance coach at Axe Capital in the Netfix series.
Reputational and risk management: Companies are under a lot of scrutiny and pressure to do more for society, for inclusiveness and for the environment. This pressure is coming from civil society groups, consumers associations, activist investors and as of more recently companies’ employees. These often translate into request to act responsibly in the community and to provide employees with the necessary tools to have higher impact on society. There is abundant evidence of media attack, (often based and speculative and on false information) on ethics, non-inclusiveness and environmental bad practices. This results in costly crisis management campaigns to recover brand strength and to prevent negative impacts on company shares when the businesses are publicly traded. Basically under this component, the CIO will build develop a stronger prevention culture in the firm which will translate into resilient brands and operations.
Fund-Raising: If you are an early-stage company and you need to raise capital, impact focus will help you attract the “smart money” you need to grow your business. If you have imbedded ESG credential in your business, you will quickly pass the increasingly tough screening process that is done by investment fund’s committees to ensure that more stringent investment criteria are met. Furthermore, if you are an entrepreneur in the US or in Northern Europe, you will find thousands of philanthropist investor willing to invest in Shareholder capitalism type of companies. Just as a background, early-stage companies that were women led in the US were more successful at raising capital in 2021, as these companies met also gender balanced team compositions which market are finally starting to like.
Policy Requirements for Business: Regulations are coming particularly in the US and in the EU requiring companies to disclose their ESG contributions, including their climate, societal and broader governance footprints. This is going to be compulsory and no matter what we believe is right, we recommend early preparedness for all corporation to build an ESG baseline in order to prevent and correct as the laws will require.
Conclusions: Based on our assessment, the markets and policy are aligned towards stronger coordination to achieve societal and environmental objectives. While we believe that markets are better placed to decide allocation of capital and expertise, going forward, CIO will be instrumental to the long-term success of companies of all sizes. Those companies that prioritize impacts, are going to outperform the market.