What are you doing to lead your company towards greater sustainability? If you cannot answer that question with conviction today, take a closer look at what is happening in the world around you. It seems that almost all companies believe that sustainability strategy is necessary for competitiveness in the future, according to the recently released 2010 Sustainability and Innovation report from MIT in collaboration with BCG. Most of us can see for ourselves that companies are facing a more demanding public. Consumers, investors and Boards of Directors, not to mention employees, are asking how companies’ policies and actions are progressing regarding the triple bottom line – people, planet and profits. In today’s market, simply claiming to be “green” is not enough. The purchasing public is becoming savvy. Most can distinguish real results from exaggerated claims. As a result, leaders recognize that over the next few years they will be pressed to fundamentally change the way their companies operate to address the challenges of sustainability. Lou Ferretti, Director, Environmental Compliance and Supply Chain Social Responsibility for IBM, says ““If companies aren’t pursuing a social and environmental agenda, their days are numbered.”
Sustainability requires companies to take bold steps to move beyond efficiency, beyond compliance – beyond just green – to a higher level of performance. To be sure, the benefits of energy efficiency and compliance are substantial. Energy-savings programs affect the bottom line directly. Likewise, strategies such as the investment in renewable energy sources mitigate the risk of potential fluctuations in energy availability. And companies that extend their focus beyond energy consumption and generation report that often sustainability initiatives become a springboard for learning and innovation. Yet the research shows a substantial gap between companies’ statements and their actions regarding the triple bottom line. Corporations seem to be falling short in execution of plans for sustainability.
“It is really all about becoming a better company,” asserts Bob Willard, author of The Sustainability Champion’s Guidebook. Without doubt, sustainability requires greater trust, transparency and cross-functional collaboration within an organization. Additionally it necessitates engaging external stakeholders such as suppliers, Boards of Directors and stockholders in new ways. Who will address these challenges if not the leaders of our companies? Yet, even leaders with the best intentions face obstacles.
Barriers to Implementing Plans for Sustainability
Uncertainty in the circumstances impacting sustainability adds complexity. For example, the future is far from certain concerning issues such as environmental regulations, energy and water availability and related technologies. The ambiguity complicates the conditions for strategy development. Additionally, leaders are challenged to shift from seeking short-term return on investments to longer-term gains. This change can be a hard-sell to high-level decision-makers. However, Lynnette McIntire, Director of Global Reputation Management for UPS in Atlanta, says, “Uncertainty is an imperative for us. In fact, we view uncertainty as a source of innovation.” And, according to McIntire, committing to sustainability does drive innovation.
Another significant roadblock is that many companies lack a common definition of what it means to be sustainable. Some companies define it in terms of compliance with environmental regulations while others, on the opposite end of the spectrum see it as creating products and processes with a primary focus on efficiency of environmental management and effects on social welfare. Without alignment around the definition of sustainability, leaders cannot craft realistic goals and plans which can actually be implemented.
Those companies which share a common definition internally may still lack an overall plan for attacking sustainability-related issues systematically, according to the World Council of Sustainability. Since many efforts are piecemeal, companies cannot gauge the system-wide effects of their investments. Peter Graf, Chief Sustainability Officer, SAP says, “Sound sustainability strategies must take an integrated approach. It requires integration of the value chain as well as integration with finance. In other words, you are not operating sustainably if you haven’t fully engaged your supply chain, engineering, finance & accounting and employees.”
And of course all companies have a myriad of priorities for how to spend their time and money. No wonder leaders find that moving their companies towards greater sustainability is difficult.
How Leaders Can Address the Sustainability Challenge
According to the MIT/BCG study, some businesses are adopting sustainability-driven management faster than others. Those companies that have embraced sustainability aggressively differ markedly from those who are cautiously wading into the sustainability water. We recently piloted our own assessment of how culture and leadership differentiates sustainability-embracing companies from those who take more cautious approaches. While the MIT BCG study looks at these differences at a high level, we launched this research program to dig down into the specifics of what distinguishes leaders who succeed with sustainability strategies from those who don’t. We consider this first assessment to be a pilot for a series of assessments which will yield practical ‘how-to’s for establishing the leadership and organizational culture to enable success. Here are some highlights of what we found in our first pilot project:
1. Craft a Clear Vision of Where You are Headed
Leaders of companies with far-reaching sustainability strategies have visions that are clearer than most leaders. Likewise, they are more capable of inspiring others. Leaders at the executive level act as the dynamic sponsors of the initiatives. They tend to be personally committed to the values of sustainability and more willing than others to reach out to stakeholders with their visions. Also, they are more likely to personally engage employees across the entire organization in the sustainability journey. “To get the most business value from sustainability, we need a senior leader to advocate for our strategy, according to Rob Frederick, VP of Corporate Responsibility at Brown-Forman, one of the leading producers and distributors of premium alcoholic beverages in the world. “Because companies tend to be siloed, implementation of sustainability strategies takes a leader who can see across the organization and put the various pieces of the sustainability puzzle together.”
Let’s face it. Most of us have a strong desire to participate in something meaningful. In Lynnette McIntire’s words, “People always want to do the right thing. They just may not know how to do it. Give them a part.” Leaders at the top who can build a compelling vision for a sustainable future will capture the hearts and minds of those who must support and implement it.
2. Create a Culture of Sustainability
Most companies will have to transform the way they do business to become sustaining organizations. For example, conventional boundaries between functional groups will shift. Profits at the expense of all else can no longer be the norm. Rewards must be realigned to reinforce behaviors that will support new policies and practices. In light of these necessary changes, it isn’t surprising that our study showed that a strong track-record with large-scale change differentiates the companies which are ahead of the pack with their sustainability efforts. Leaders who succeed in executing sustainability strategies take care to align their goals and their cultures on the front-end of their efforts. Because of the context within which sustainability strategies are implemented, even moderate targets require an organizational climate that embodies trust, collaboration, and tolerance for ambiguity. Leaders that succeed make sure that their organizations are change-ready.
3. Develop Collaborative Relationships
Sustainability cuts across many disciplines, and affects a lot of stakeholders both internal and external to the organization. Leaders that succeed approach the work from a holistic, systems perspective. For example, our study showed that the leaders of successful companies were better able to collaborate across untraditional boundaries. They form alliances with unusual partners such as their competitors and NGO’s and they encourage people within their organizations to seek out and learn from those who are outside of the organizational boundaries. And of course, collaboration begins at home.
Leading organizations towards sustainability isn’t easy. However, when leaders think about what they would like to leave as their legacy, most would be pleased to think that they contributed to their organizations’ successes through sustainable practices. Even though the path to sustainability is demanding, it is the responsibility of leaders to take the bold steps necessary to address the triple bottom line – people, planet and profits. These culture changes often seem daunting to leaders. However, they don’t have to do it all at once. As Daniel Goleman says “Visionary leaders tackle great challenges with grand consequences over long time spans.”
Dr. Kathleen Miller Perkins is a psychologist and is the CEO and owner of Miller Consultants , a firm specializing in organizational development, executive coaching and change management founded in 1980. In addition to managing the company, she continues to remain active in assisting client organizations in assessing and addressing the organizational culture and leadership requirements for executing sustainability strategy. She has delivered services to over 100 public and private sector companies. Dr. Miller’s client list includes organizations such as IBM, Toyota, BC Hydro, Brown -Forman, General Electric, Ashland Chemical, Ernst and Young, Bristol Myers Squibb and Kindred Health Care.