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Transforming for a sustainable future
MATT GITSHAM
Pressure is building within your industry about the negative environmental impact of a traditional manufacturing process. The implications for your organization are huge (and likely to be extremely costly). As a leader in the business, do you engage positively with the sector debate and take a leading role in attempts to find a solution or do you keep your head down and hope it will go away?
Employees in your organization are becoming increasingly vocal in their concerns about the possibility of modern slavery in the supply chain. As a leader, do you welcome their challenge and open up safe spaces for conversation and the co-creation of solutions — or do you attempt to stifle the debate?
As organizations start the process of building back better after the pandemic, these leadership dilemmas will arise more and more frequently. As we gradually come to terms with the ‘new normal’ and the challenges of living with COVID-19, the focus is starting to shift from emergency responses to a volatile situation to assessing what we may need to do differently in the longer-term.
Key to this transformation, will be taking urgent and ongoing action toward achieving net zero and tackling the wider sustainability and human rights agenda.
Multiple global crises were already upon us before the pandemic hit. At the same time as the virus was taking hold, the impact of the climate crisis was becoming ever more visible. 2020 began with images of Australia on fire. Summer 2021 brought record heat to the Western United States and Canada, wildfires to Siberia and extreme floods to Europe and China.
There have been other global ecological and human rights challenges too. Biodiversity and species loss have reached such a scale that scientists are warning the Earth is on the brink of a Sixth Mass Extinction, with more and more species being categorized as critically endangered or under threat. We are faced with pressing human rights challenges too, such as systematic discrimination against certain groups (witness the Black Lives Matter and #MeToo movements) and the 40 million people trapped in modern slavery today, many of these within corporate supply chains.
These are all crises that many people — NGOs, government leaders, business leaders — were already working together long before the Covid pandemic hit. Frameworks, like the UN Sustainable Development Goals and the Paris Climate Agreement, had been developed as roadmaps for the work that needed to be done.
One thing COVID-19 has taught us, however, is about the need to be better prepared and to build resilience to deal with the predictable, and other unpredictable shocks, that may emerge down the line. It has been a wake-up call about the need to build a recovery that doesn’t just take us back to the status quo, but which sees us constantly transforming as we look to find ways of taking a more responsible and sustainable approach to the way we do business.
A commercial imperative
There’s not just a moral imperative for organizations to take action, but a commercial one too. Corporates have for some time been facing increasingly loud calls, from customers, regulators, investors and employees, for a radical change in the way they operate. Customers are increasingly looking to deal with companies who can demonstrate green credentials and a concern for human rights across their supply chains. Employees increasingly want to work for organizations with a strong societal and sustainability track record, whose values and purpose echo their own. Reputations are at risk as pressure groups become increasingly vocal in their demands that organizations act on everything from reducing carbon emissions through to inclusion and gender and racial equality.
The UN Sustainable Development goals have been described as the world’s biggest business opportunity, with economic opportunities of US$12 trillion a year25 — equivalent to 10 percent of global GDP — available in four key economic areas alone.
Businesses are sitting up and taking notice, and recognizing they need to redefine corporate success beyond just delivering return on investment to shareholders, and toward delivering societal impact, resilience and a greater sense of shared responsibility for humanity’s future.
A new organizational blueprint
What does this mean in practice for organizations who genuinely want to make the shift towards conducting sustainable, responsible business? First and foremost, it means going beyond lip service and compliance. It means abiding by international human rights norms and global environmental agreements, regardless of whether governments are enforcing them effectively. It means seeking opportunities for growth through innovation and bringing to market products and services that make a difference to global challenges. And it means taking a stance and speaking out if required — sometimes pushing governments for more regulation, for example, rather than fighting against it.
Some of the world’s most influential companies are leading the way. Apple Inc, for example — one of the world’s most valuable companies — announced at the height of the pandemic in July 2020 a plan to be entirely carbon neutral by 2030, including emissions from across its supply chain and product life cycle, with consequent implications for all companies seeking to be suppliers.
New approaches like these demand a new organizational blueprint, encompassing strategy, culture and mindset. So where does an organization start? How does the business decide which global challenges are the important ones to focus on? And how do leaders go about building the culture of responsibility that’s needed to support the transformation?
The winning combination
The answer lies in a combination of strategy and leadership. The first step toward establishing a new strategic direction is to conduct a sustainability assessment, which will provide a map and compass to guide future action. This will help the organization assess exactly where it stands in relation to the sustainability agenda — and what it needs to do next.
The United Nations Sustainable Development Goals (17 of them) — which cover issues such as good health and well-being, gender equality, responsible consumption and production and climate change — are a good starting point.
Using these as a basis, organizations can draw up a ‘long list’ of challenges that are relevant to their business. They can then begin to hone this down by identifying those which have a current high impact (or a potential high impact) on the business, and mapping these against those challenges which are also of high interest and concern to stakeholders. With a clear picture in place and priorities identified, the focus can then shift to creating a culture which will enable action — which is where leaders come in.
Identifying the issues that matter and prioritizing
Source. Corporate Citizenship. Sustainability Strategy Simplified.
A changing role for leaders
As more and more organizations have engaged with helping address global sustainability and human rights challenges, so business leaders have found themselves adopting new leadership roles. As we seek to build back better, this leadership shift needs to accelerate.
At Hult Ashridge Executive Education, we’ve been leading a program of research on this changing role, talking with some of the CEOs at the forefront of the trend. Their experiences suggest that today’s business leaders need a different mindset and a different skill set to their predecessors.
A generation ago, a leader’s role was to keep their head down and focus on the numbers. Challenges in society were the job of political and activist leaders. For business leaders to get involved would be a distraction, would lack legitimacy and would end up adding cost to the bottom line.
But in today’s world, business leaders need a different mindset to be successful. They need to see addressing societal and sustainability challenges as at the heart of their job description and not as a source of cost, but at the core of the way they add value. They are leaders in society as much as leaders of the business.
Rather than seeing a trade-off between doing good and making money, leaders need to aim to achieve each through the other.
Leading change inside and outside the organization
Our interviews (with CEOs and senior executives from more than 30 companies) showed that leaders are indeed beginning to think differently about the scope of their role. They recognize that they are responsible not just for leading cultural change within their organization, but also for leading change across their industry sector and wider society, often working in partnership with campaigners and other business and political leaders.
The chief executives we spoke to talked of seeing their own role in influencing change in their organizations in terms of opening up the space for others to behave differently — through the goals they articulated and the rationales they developed for pursuing them, the stories and people they celebrated, the conversations they started, the questions they asked, what they were seen to spend their own time doing, and which individuals and groups got recognized and rewarded and for what.
This new horizon to their role has required leaders to develop skill in areas that historically have not been a conventional part of their repertoire; contributing to public debate with an informed point of view, relating well with multiple constituencies, engaging in dialogue to understand and empathize with groups and communities with perspectives different to their own, and engaging in multi-stakeholder collaboration with unconventional partners.
Take consumer goods giant Unilever for example.26 Former CEO Paul Polman launched Unilever’s Sustainable Living Plan in 2010 , a 10-year strategy to double the size of the business by 2020 by setting targets such as helping a billion people improve their hygiene habits, bringing safe drinking water to 500 million people, doubling the proportion of the food portfolio meeting stringent nutrition standards, halving the greenhouse gas impact of Unilever products across their lifecycle and sourcing 100 per cent of raw materials sustainably.
Over the ten years of the implementation of this strategy, many of these targets were met and good progress was made on many others, and Unilever has become a benchmark for others to emulate. A corporate strategy with goals like this has required leading change within the organization, but also leading change in consumer behavior, leading change among suppliers and competitors across industry sectors and engaging with governments to lead change in policy frameworks.
Implications for talent management and development
Getting this new leadership role right is increasingly important for organizations. But to date, the extent to which they have ended up with people in leadership roles who can do this well has tended to be the result of chance rather than design.
We asked business leaders for their perspective on how it was that they and some of their peers had grasped the need to lead in this kind of way, while many of their other contemporaries were still operating from an out-of-date leadership blueprint.
While each individual’s story was unique, the clear theme was that certain key experiences had been crucial in influencing and shifting perspectives. For some, it was formative experiences around upbringing, university and business school study. For others it was influential mentors or first-hand experiences like engaging with people living in poverty, personal experience of challenges like the impacts of climate change, or personal first-hand experiences of the changing interests of key stakeholders. Peer learning networks, like the UN Global Compact and World Business Council for Sustainable Development, for example, were also influential.
These stories have important implications for how organizations think about talent management and executive development. They suggest that more is required than just briefings and lectures on global trends and their commercial implications. Relationships and first-hand experiences are at the heart of what it takes for business leaders to build the emotional connection and commitment to put this agenda front and center of their work.
To foster the right kind of leadership capability in their organizations, HR, learning and development and organization development teams need to value these kinds of life experiences when making decisions about recruitment, career development and succession planning, and make sure they are embedded in the HR processes that underpin them. Not because they are ‘nice-to-haves’ that demonstrate a rounded individual, but because of the crucial contribution they make to developing a worldview, relational ability and the organizational culture now essential for organizations to survive and thrive.
There is clearly much work still to do. A study by the UN Global Compact and Russell Reynolds Associates27 — the executive search firm — found that while 92 percent of business leaders believe integration of sustainability issues is critical to business success, only four percent of C-suite role specifications demand sustainability experience or mindsets.
Executive education for a sustainable future
If these personal, first-hand experiences are key to developing sustainable leaders, organizations need to think about how they can support this through their executive education programs.
Ashridge’s research with organizations like IBM, HSBC, Lendlease, Interface, IMC Group and others suggests that more and more organizations are structuring their leadership development activities to include powerful experiential learning.
Initiatives have included giving senior executives the chance to develop relationships with people experiencing some of the world’s most pressing challenges, as well as with the people working to address these challenges.
Organizations are also finding ways to help their leaders engage with new ideas which will help them make sense of the demands of the new business context, such as ecology, complexity, systems thinking and social constructionism.
Take Dutch multinational Philips for example. As part of its leadership development program, participants worked on projects to develop new commercial propositions which would also help to improve people’s lives (in line with the organization’s goal to improve the lives of three billion people a year by 2025).
One learning project, for example, challenged participants to develop proposals for serving rural communities in India with good business case potential and the ability to scale up. After spending time engaging first-hand with women in rural Indian communities as well as with health professionals and NGOs, the team developed an idea to use mobile communications technology to support remote diagnosis.
The result has become a thriving public-private partnership involving Philips, government and NGO partners. Health professionals now travel among rural communities with portable ultrasound, X-Ray and ECG testing equipment and send test results electronically to specialists in distant hospitals using mobile technology, who then liaise with the health professionals to discuss diagnosis via video-conference.
Singapore-based shipping conglomerate IMC Group is another example. Working with partners from the Global Institute for Tomorrow, the IMC Integrated Leadership Program for high potentials in the organization involves a week of classroom-based learning exploring socio-political and environmental trends, sustainable development and business, followed by a week of experiential immersion learning, tasking participants to develop a strategy that embraces the principles of sustainable development for a specific part of the business. One iteration of the program saw participants spend a week on one of the company’s palm oil plantations in Kalimantan, Indonesia, engaging with local management, local workers, families in local communities and ecologists.
Facilitating learning
With pandemic concerns likely to disrupt travel and face-to-face personal contact for some time to come, opportunities for first-hand experiences will be harder to achieve, but there are numerous other ways to facilitate learning around global challenges. These might include virtual simulations, business challenge projects, and coaching and mentoring from leaders who have been at the vanguard of this change. There is also an opportunity to provide learning experiences that allow participants to connect virtually with stakeholder groups such as industry peers across the value chain, policymakers in governments and international institutions and activists in NGOs, trade unions and other civil society bodies.
Organizations need to support their leaders as they step into this new territory and begin to lead the necessary transformation, not least in developing psychologically safe environments so that those who are leading change are free to challenge corporate thinking and experiment with new approaches, without fear of negative consequences.
It is time for organizations to take this unique opportunity — indeed duty — to step up and play their part in developing a sustainable, responsible future for us all.
About the author
Matt Gitsham is Director of the Ashridge Centre for Business and Sustainability at Hult Ashridge Executive Education, part of Hult International Business School. Matt has led numerous research projects on business and sustainable development and human rights over nearly two decades at Hult Ashridge. Recent projects include exploring CEO perspectives on the implications of sustainability for business leadership; CEO lobbying for more ambitious government policy on sustainable development; and the role of business in shaping the UN Sustainable Development Goals (SDGs). He has collaborated with and advised well-known networks and organizations including the UN Global Compact, Unilever, IBM, HSBC, De Beers, Cemex and Pearson among others.
Footnotes
25 https://www.wbcsd.org/Overview/News-Insights/General/News/Achieving-the-Sustainable- Development-Goals-can-unlock-trillions-in-new-market-value
26 https://www.theguardian.com/sustainable-business/blog/unilever-green-credentials- sustainability