Modern sustainable leadership
When I was nominated this year by the Institute of Directors (IoD) as a candidate for the Diversity and Inclusion category at the Director of the Year awards, I took it as an opportunity to reflect on how sustainable leadership has evolved over the past decade.
The depth of sustainable leadership has expanded in a very complicated and interwoven manner. There have been new regulations and frameworks at all levels – corporate, government, non-profit and within civil society. For example, as highly regarded research analyst, speaker, and writer Josh Bersin says, the EU has long been committed to improving worker well-being, aiming to create more transparent and predictable working conditions for all its 182 million workers. Now, it’s moving ahead with this objective on a number of fronts:
- Its Transparent and Predictable Working Conditions Directive, which member states were required to enact by August 2022, is geared towards improving employee protections and increasing labour market transparency.
- Its Work-Life Balance Directive, which came into effect in 2019, aims to set minimum standards for paternity, parental, and career leave as well as flexible work arrangements.
- Its Corporate Sustainability Reporting Directive (CSRD) mandates that, starting in May 2024, any company with €40 million in net turnover, €20 million in assets, or 250 or more employees that trades in Europe, publish detailed information about its efforts to address a range of sustainability challenges.
This poses a huge strategic shift for many organisations and this shift is entirely industry agnostic. Reflecting on what’s ahead, I’d like to touch on three key themes that have resonated with me in my discussions with industry leaders, CEOs and elected government representatives.
Public private partnership – sustainable ecosystems
Sustainable leadership is now synonymous with ecosystem building – there is an overwhelming consensus that the protection of our planet can’t be the responsibility of just government. It’s a game changing time to be in sustainable finance, the next decade could be humanity’s most important. The banking and financial services industry is at a turning point in its quest to establish dominance in ESG, sustainability, social impact and corporate governance with many banks in a “place race” when it comes to showcasing their ESG credentials and expertise.
In the corporate context, social purpose is redefining organisational drive. McKinsey states only 7% of Fortune 500 CEOs believe their companies should “mainly focus on making profits and not be distracted by social goals.” In 2022 Harvard Business Review stated that 82% employees in organisations of all sizes feel that purpose is important but only 42% believe their organisations drive impact. In the UK in 2021, 51% FTSE 100 companies included ESG measures in executives’ annual bonus requirements.
The societal solution to the green transition lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not just social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success.
Empowered productivity and purpose-building
The root of driving productivity is crystallisation of organisational purpose. Cause-based purposes (such as Patagonia’s “in business to save our home planet”) drive great marketing and brand value, while competence-based purposes (such as Mercedes’s “First Move the World”) express a clear value proposition to customers and employees. Culture-based purposes (such as Zappos’s “To Live and Deliver WOW”) can create internal alignment and collaboration with key partners. A deeper dive into tying the purpose to all key stakeholders would signal more credibility and help to drive greater engagement.
Developing a stronger sustainable employer brand is non-negotiable in 2023 : branding campaigns with leading voices and thought leaders, charities and NGOs, involved government partnerships, active PR, and specialist
journalist engagement. Strong narratives and storytelling need to drive branding and communication strategy. The green transition is a powerful complex societal conversation, organisations’ sustainability stories need to be just as culturally significant.
‘S’ of ESG – sustainability in the social justice era
Firms established in the 20th century were simply not designed for sustainability and consequently they have not developed a culture of sustainability. There are very few exceptions to this (one example being the previously mentioned Patagonia, the outdoor clothing company founded in 1973). This means that for the vast majority of older organisations, putting sustainability at the heart of their purpose requires a deep cultural transformation. It’s not simply a recalibration of the mission statement or a new manifesto of values. Changing people’s hearts and minds is the biggest challenge — and it must start with an organisation’s leaders. A collective agreement on a new social contract is crucial: leaders must walk the talk with employees and stakeholders.
A recent survey by PwC reveals that many CEOs anticipate climate risk will affect their cost profiles and supply chains in the next year. However, despite these challenges, 60% of the surveyed CEOs do not plan to reduce headcount, and 80% do not plan to decrease salaries, as they recognise the importance of retaining talented employees.
Modern sustainable leadership must thus build upon the principles of traditional sustainable leadership while adapting to the rapidly changing dynamics of the 21st century. It recognises that leaders today face unique challenges and opportunities related to technology, globalisation, climate change, social justice, and more.
Few organisations have touched on all the above themes well and this poses a huge challenge. Delivering a just, green transition is a mammoth task and an existential threat to the billions or trillions of potential lives of our future descendants.
This is a guest blog which contains the views of the author and does not necessarily represent the views of the IoD.