Key Findings

  • Published by research organization Trellis (formerly GreenBiz)a new reportstates that sustainability officers at large corporations are facing a balance between innovation and compliance responsibilities, the latter stemming from new regulatory and reporting requirements.
  • The report found that sustainability teams at large corporations continue to expand, with 74% of respondents reporting increased staffing over the past two years. At the same time, budget growth has slowed: in 2023, just over half of respondents (54%) reported increased sustainability budgets, down from 74% in 2022.
  • Trellis noted that direct CEO engagement with sustainability issues has also declined, with the percentage of CEOs reporting being "very engaged" in sustainability initiatives dropping by 9 percentage points since 2022.

Deep Insights

This biennial report is based on a 2023 survey of 1,185 sustainability professionals across industries, of whom 75% are employed by large organizations with revenues exceeding $1 billion, and 84% come from large U.S. organizations. The largest group of respondents were managers or senior managers, followed by directors or senior directors.

"The sustainability profession is at a crossroads," John Davies, president of the Trellis Group network, wrote in the report, referring to the impact of increasing regulatory and compliance obligations on companies. "The question is whether these efforts will focus on meeting minimum compliance requirements or strategically work to reduce companies' negative impacts and increase their positive impacts."

Increasing Regulation

The report describes the recent wave of regulation as "unprecedented," given that several recent laws and regulations mandate disclosure of sustainability information, includingEUandCaliforniaregulations, as well as the U.S. Securities and Exchange Commission's climate risk disclosure rule—which iscurrently stayed。

Companies participating in the Trellis survey reported increased staffing in departments deemed "critical to sustainability efforts," with approximately 74% of respondents reporting increases. The healthcare sector saw the most significant growth in sustainability teams, with 88% of respondents in that industry reporting increased ESG-focused staff.

Meanwhile, general counsels and chief financial officers are playing a more active role in sustainability reporting.

"The increase in pending regulations has prompted many companies to shift their reporting structures toward the office of the general counsel," the report states. The Trellis survey also found that the proportion of respondents reporting to the office of the general counsel has doubled compared to two years ago.

Additionally, the report notes that an emerging role called the "ESG controller" is taking shape, which will play a key role in overseeing data systems and processes related to sustainability disclosures. Trellis reported last March that more than half of Fortune 100 companies have an ESG controller. At that time, 20% of respondents said their organizations had established an ESG controller function.

Changes in Sustainability Functions Within Organizations

The increasing number of regulations—and the resulting redistribution of ESG reporting responsibilities and staffing within companies—means compliance occupies a larger share of organizational sustainability functions. There are concerns that the shift toward compliance may prompt some early movers to scale back sustainability ambitions due to fears of legal liability and to avoid consequences for failing to meet certain goals.

The report states that this could result in an increase in "greenhushing," which is the deliberate "downplaying or reducing communication of environmental or sustainability commitments and performance." Approximately 14% of respondents said their organizations have reduced the use of terms like "green" and "ESG" in public communications, while 4% have abandoned these terms entirely.

Among industry stakeholders, some believe that the emphasis on risk mitigation does not necessarily threaten innovation in the field.

"Compliance is not replacing innovation but complementing it," William Theisen, CEO of climate consultancy EcoAct North America, told ESG Dive. "Companies are leveraging data collected for reporting purposes to drive transformation and align their business strategies with long-term sustainability goals."

Others argue that the increase in compliance responsibilities within corporate sustainability functions is more about establishing a common set of standards.

"This is building a common language and understanding that all parties—companies, investors, and stakeholders—can anchor on," Maura Hodge, KPMG's U.S. sustainability leader, told ESG Dive. "The key is ensuring compliance activities are managed and automated efficiently, freeing up resources and time for forward-looking and innovative projects."

The Relationship Between CEOs and Sustainability Leaders

The report found that sustainability leaders are rising quickly within organizations, with an increasing number reporting directly to the CEO. Nearly one-third (30%) of senior sustainability executives said they report directly to the CEO, up from 22% two years ago.

At the same time, the report states that the percentage of CEOs "very engaged" in their companies' sustainability initiatives has dropped by 9 percentage points since 2022, when 20% of surveyed CEOs said they were very engaged in their companies' sustainability efforts. Hodge believes this change reflects the evolution of sustainability programs rather than a reduction in priority.

"The 9-percentage-point decline in CEO engagement with sustainability initiatives since 2022 reflects the maturation of these programs, not a diminishment of their importance," Hodge said. "As sustainability becomes increasingly operationalized, it is naturally transitioning from a CEO-driven initiative to an integrated business function."