Business Sustainability is now a Boardroom Agenda
If businesses continued to hold faith in traditional business models and management approaches, then it would be unlikely that so many of them and all business schools would be exploring more sustainable alternatives as the way forward. The rise of Sustainability issues up the Boardroom agenda reflects its close linkage to risk, governance and strategy agendas. This has driven increased executive interest in their development, understanding and ability to lead within a sustainability agenda.
5 Good reasons businesses are driving forward sustainability issues
There are 5 good reasons why many business owners and managers are driving more strategic sustainability approaches in their businesses:
- Because their current competitors are thinking about it
- Because their clients and customers want them to do it
- Because their next significant marketplace competitor is already doing it
- Because it makes business sense and is the right move to make
- Because they realise their cash flow, profit and future growth will suffer if they don’t!
The integration of sustainability and business interests
For many organizations today, sustainability is the business. Their founders and leaders have deliberately positioned themselves within a blind spot within their competitor’s market insight or have deliberately set out to appeal to consumers who value ethical and socially responsible products (i.e. Unilever’s domestic cleaning products) and services (renewable energy suppliers), or who wish to associate with organisations that mitigate issues of environmental or social concern they are alert to (i.e. Patagonia’s recycled sea plastic clothing range). In all cases, these organisations possess a strategic business model that:
- Reflect a societal concern within the consciousness of consumers
- Delivers a competitive edge over existing incumbent rivals within their market sectors
- Stimulate a ‘relationship’ between the business and customers
- Drive innovation within existing products and stimulate the development of new longer-term replacements
- Increase the motivation and ‘feel good’ engagement with their employer amongst staff; and
- disrupt market share.
All Business is ultimately rooted in the Environment
All organisations ultimately derive their economic activity from the exploitation of the natural environment and its resources. It is apparent to most organisational leadership groups by now that climate change and future global resource constraints will place limitations on future economic growth rates within some sectors, whilst the exploitation of sustainable resources, such as renewable energy and hydrogen, holds out the possibility of freeing up others. The strategic sustainability challenge that many early adopters are addressing is how to replace or secure continued access to the valuable, rare, difficult to imitate or non-substitutable resources they require!
These are some of the forward-thinking leadership challenges that have elevated sustainability from the operational risk domain of QHSE and organisational green teams green and upwards into the Business Planning and Enterprise Risk Management domain of the C-suite.
Bridging the Leadership gap
Business owners or executives, with the support of their own management teams, are the people best placed to bring about organisational sustainability changes within their organisations. These individuals and teams are the ones who most clearly understand the existing business, the challenges it faces and to undertake the analysis of issues and scenarios. They are also the people best placed to lead any change programme for sustainability. Consultancies, such as Leading Green, have the capacity to advise and support, but from experience as a corporate executive in industry and government, they lack the networks and insights required to overcome internal blocks.
Key Sustainability Leadership Functions Leading Green Training Courses
Business & Sustainability – The management of intangible risk
Sustainability issues are not significantly different from many of the day to day issues that business leaders face. They impact just as readily on long-term cashflow, profitability, growth, procurement, management, competitiveness and regulation as much as any more traditional management issue. What sets sustainability leadership and management practices apart is a greater focus on governance, the long-term strategic needs of the business and a watching brief over many more intangible risks than are usually overseen through financial risk management. Those e s that can rapidly engulf a business and its management team.
The management of intangible risks has as its central focus issues of leadership and behavioural risk. Often derided as ‘soft’ risks, these can have brutal consequences for a business in terms short sightedness as to product life cycle (cradle to grave product type), managerial incompetence in the face of change, s ‘group think’ or ivory tower mind-set and arrogance on the part of management, ethical misjudgement, inability to integrate management, mismanagement of reputation risks, mismanagement of value conflict, poor public relations, ineffective corporate governance, and so on.
H&M Conscious Collection derided in the press for greenwashing and for not giving the consumer precise information about why these clothes were labelled as sustainable. The furore attracted unwanted regulatory interest . The lesson to be learnt – consumers are more environmentally and sustainably conscious than ever and companies should think twice before making greenwash marketing claims.
Sustainability and Business longevity
In leadership terms, we can be clear that if a sustainability issue becomes material to business success or survival, then only the foolish would ignore it as an issue. What is material will depend on the wider mindset of the leadership team to risk management, the specifics of the industry sector and the degree of dependency in specific supply chains or service providers. The lesson to be learnt is that sustainability and its management must link to and align directly with how the business operates, its expenditure and material flows, its governance and strategic planning processes, and importantly how the leadership team and organisation views its mission and desired approach to business and its customer base.
To continue viewing sustainability as an ‘add-on’ or cost to the business, keeping it separate from core business decision making and long-term business planning remains a common mistake amongst many business owners and managers. Limiting the scope of sustainability management to marketing, branding and the management of direct environmental impacts can eventually be a costly mistake.
Sustainability and Responsible Management
Sustainability has developed close links with leadership theories promoted by many leading Business Schools regarding responsible management, transformational and ethical leadership practices and Governance within Boardrooms and senior leadership teams. It is rapidly shaking off the old misconception of a ‘doing good, but not core to the business’ managerial activity. Environmental Management Systems (such as ISO14001) have over the last three decades provided organisations with a solid administrative base from which middle and lower tier managers can control bio-physical risks, waste management and act as a policy platform for other localised or industry specific issues, but has continued to struggle through lack of leader engagement to become a strategic tool in business. Hence the revision of the ISO14001 standard in 2015 to place a greater emphasis on the visible (auditable) commitment to and engagement with the system by the organisation’s leadership team.
How Inspirational Leaders Bridge the Gap Between Sustainability and Business
I have worked with several visionary business and sustainability leaders — people who inspire and set the culture within their organisations, permanently changing how they conducted themselves professionally. They have all had several things in common.
First, they don’t hide out in the management suite – they walk the floors, engaging with employees across all functions talking about their aspirations, vision for the organisation and what they are working to achieve. They also use these floor walks to gain business & sustainability insights. Dropping in on teams they repeatedly ask penetrating questions regarding current issues, behaviours, scenarios and encourage open feedback by encouraging staff to tell them about what they are concerned with, the practical issues and realities of life on the shop floor, the perceptions of front line staff on their client future needs and wants, and critically how engaged with the business the staff and the organisation’s repeat purchase customers are!
Secondly, they work internally across the business’s boundaries and reporting lines, helping themselves (and the teams they lead) build up a wider business mindset of organisational activities and issues. This helps them maximise information flows and to determine options. They also encourage their teams to follow a similar open-door approach and to working in collaboration with other teams – a rare attribute in some organisations where internal discord and intra-executive competition stifle productivity.
A third skill is an inherent understanding of systems thinking, the ability to simplify and integrate different systems, and a curiosity that extends further than just understanding business systems and processes into innovation and problem solving. Inspirational leaders have the gift to mentally and linguistically breakdown issues in their strategic communication skills and actively encouraging:
- Cross-silo working and the linking of internal operational activities to deliver mutually beneficial goals;
- Challenging and examining individual function and corporate objectives to determine inter-relationships and the potential for unintended consequences; and
- delivering business outcomes (including sustainable cash flow) in a way that supports the characteristics of a sustainable organisation.
Fourthly, they create strong teams that foster a wider sense of corporate engagement, intellectual curiosity, and cross-functional collaboration than colleagues that focus exclusively on their core administrative, professional, technical or business support roles.
Finally, transformational business and sustainability leaders and take accountability and responsibility for their duties. They actively lead their managerial portfolios and direct them back into the organisation’s primary purpose or business objective.
There is now a proven body of research that identifies clearly that Businesses with strong environmental and social sustainability leadership approaches commanding greater customer brand loyalty and higher stock valuations. This is of credit to the individual executives and managers who have brought about these changes in organisational culture over the last decade.
One of the most interesting recent trends has been the movement in many Boardrooms to actively engage sustainability risk management approaches as a means of testing the strength in Corporate Business Plans and strategic programmes. Increasingly many are integrating Sustainability and Responsible Management practices with their existing Governance, Enterprise Risk Management and Economic Sustainability activities – as all share a common focus on business longevity. The objective being to provide a clearer boardroom picture on the tangible and intangible factors influencing cash flow, profit, strategic growth, risk and to map emergent trends in organisational culture, consumer and stakeholder relationships.
This willingness to embrace sustainability as a Boardroom parameter, reflects a greater understanding that an organisation’s profitability is now a key driver in its valuation. Previously the greater percentage of a company’s ‘value’ was linked directly to its tangible assets (property, assets, etc). Today in some of the larger corporations less than 20% of share price value can be directly attributable to financial performance and physical assets, the remaining 80% reflecting intangible assets such as brand, customer base, future market risk, intellectual capital and whether a business has a ‘future fit’ business model aligned to responsible management & sustainable business practices.
This has encouraged many business leaders to adopt a more active and hands on role in the management of organisational sustainability practices, rather than just advocating responsibility down to their QHSE teams, increasingly business sustainability leaders and their Boardrooms are identifying why and when a sustainability issue needs to be addressed, and the functional and green team managers then respond in how the business should adapt.
The full range of Leading Green training courses can be accessed at https://www.leading-green.com/
Good luck in your Sustainability Leadership journey.