The New Sustainable Leadership Era – Why It’s Here to Stay
Sustainability and the New Leaders
Leadership matters. We hear this all the time, but why? Because all organizations follow the mindset of the leaders in charge. We follow leaders for direction. We follow them for guidance in uncertain times. We also follow them for inspiration, and validation of beliefs. However, in an organizational structure, we also follow leaders for our own status and recognition. The new sustainable leadership era is here to stay.
In the simplest terms, a leader is tasked with creating the corporate vision, painting that vision for all to see, then enrolling the stakeholders (internal and external) into that vision.
In the modern era, we think about leaders like Steve Jobs. He led one of the great movements of our age with his passion for the computer (and what it could contribute to society). Did he have a vision for Apple (and the entire home computer industry)? Yes. Was he able to paint that vision to employees, consumers, and investors? Oh yeah. Did he gain legions of followers from his almost “evangelical” efforts? You bet! His impact is still felt today, over 10 years since his untimely passing.
Will we see a leader cut from the cloth of someone like Steve Jobs in sustainability? Will one company, or one county stand up and spur change in a monumental way? We hope so, because it will take an epic effort to meet the lofty environmental goals we have set. At the cornerstone of that country, company or local movement sits a leader destined to enroll and inspire us in this vision.
The Sustainable Board
For a company to become sustainable, the efforts must be clearly modeled by all corporate managers, but it starts at the top with the board of directors. Sustainability must be part of the corporate strategy, and while the board is not tasked with outlining or acting directly on strategy, it is their responsibility to equip the firm with the leadership team that will be responsible for these efforts and the most important choice the board will make is the CEO.
While the CEO sits at the top of an organization, and is most visible to the employees and staff, it’s the Board of Directors that can ultimately set the tone for culture, success and driving change towards sustainability. Their actions and attitudes can influence the behavior and values of employees, customers, and especially the stakeholders. By showing a strong commitment to sustainability, board leaders can encourage and motivate the company’s c-levels to direct and support the efforts.
However, here’s where a huge gap exists between sustainability and board-level directors. Most board members are senior executives who are retired, semi-retired, or at least out of the day-to-day direction of their companies (otherwise, they’d probably not have the spare time to serve on the board). These leaders have decades of experience, and many times ran multiple companies that aligned with the boards that they serve on.
That multitude of experience of leading a firm was probably 10, 20, or 30 years ago. If we back up in time and look at the business landscape, there was little, or no attention paid to sustainability (at least not on the wide scale we see today). So, our typical board member, while very versed at funding, financing, and operations, probably did not serve in a direct leadership role in a time where sustainability was a C-level topic, let alone a board-level one.
The Sustainable CEO
Since the CEO is the highest-ranking company officer, they oversee all corporate activity, and are responsible for the organization’s ultimate success. The toughest decisions lie at the feet of this individual. Former U.S. President, Harry S. Truman famously said, “The Buck Stops Here”! Meaning, that whatever happens within the organization, it’s ultimately the person at the top’s responsibility.
Typical CEO job descriptions include the following duties:
● Creating, communicating, and implementing the organization’s vision, mission, and overall direction.
● Leading the development and implementation of the overall organization’s strategy.
● Implementing the strategic plan that guides the direction of the business or organization.
● Overseeing the complete operation of an organization.
● Evaluating the success of the organization in reaching its goals.
● Looking at potential acquisitions or the sale of the company under circumstances that will enhance shareholder value.
● Representing the organization for civic and professional association responsibilities and activities in the local community, the state, and at the national level.
● Participating in industry-related events or associations will enhance the CEO’s leadership skills, the organization’s reputation, and the organization’s potential for success.
So, outside of these normal day to day applications of strategy, what makes the Sustainable CEO unique? In Marc Epstein’s book, “Making Sustainability Work”, he points out that the new CEO must also govern these nine distinct elements of the business to ensure that sustainability is achieved.
- Business Relationships
- Financial Returns (Investors and Lenders)
- Community Involvement/Service
- Value of Products and Services
- Employment Practices
- Protection of the Environment
On the surface, these seem like elements of any business that wanted to survive would tend to, however look back just a few years and you can find hundreds of examples of companies that weren’t ethical, had no transparency, forged lopsided business relationships, demonstrated little or no community involvement, practiced heavy handed employment tactics, and put protection of the environment last on their list!
The Role of CSOs
A little newer to the C-suite is the role of Chief Sustainability Officer or CSO. In some cases, the position has existed for over a decade. However, most CSOs we’ve spoken with have been in the position for less than five years.
A Chief Sustainability Officer is a senior executive responsible for overseeing and implementing a company’s sustainability strategy and initiatives. Their role includes developing and implementing policies, programs and projects that promote environmental, social, and economic sustainability, as well as reporting on the company’s sustainability performance and engaging stakeholders on sustainability issues, typically in the form of ESG reports.
The CSO works closely with other departments and business units to integrate sustainability into core business operations, and to ensure the company meets its sustainability goals and commitments. Those business sectors include:
- Environmental Health & Safety (EHS): EHS is responsible for protecting employees, the general public and the environment. They work closely with CSOs and other sustainability leaders to assess risks to health and wellness and manage safety programs.
- Corporate Social Responsibility (CSR): CSR, like EHS, is concerned with environmental safety and how that can affect the company’s reputation. CSOs will work with CSR to engage stakeholders in addressing social and environmental issues. CSOs also help CSR in forging partnerships with external entities such as non-profits, government agencies, and environmental organizations to help align the company with regional and global sustainability issues.
- Procurement: CSOs work with procurement departments to help develop evaluation metrics for suppliers with respect to their environmental and social performance. The CSO can help to encourage suppliers to source eco-friendly materials and outline environmentally friendly activities such as recycling and waste reduction programs.
- Operations: Since Operations is the department within a company responsible for the day-to-day management of the production and delivery of goods and services, they play a crucial role in a company’s sustainability efforts. When it comes to specifying materials, supply chain efforts, energy usage and resource management, Operations is ground zero for the CSO’s involvement. CSOs support operations by:
- Implementing energy-efficient processes and technologies, such as using renewable energy sources, reducing waste, and improving resource efficiency.
- Managing supply chains to reduce the environmental impact of transportation and logistics, such as using more environmentally friendly modes of transportation and optimizing supply chain routes.
- Incorporating sustainability considerations into product design and development, such as using eco-friendly materials like Heartland’s Imperium, and designing products for recyclability.
- Engaging employees in sustainability efforts, such as through training and education programs and promoting environmentally responsible behavior.
- Co-collaborating with other departments, such as sustainability, procurement, and EHS, to integrate sustainability considerations into operational processes and decisions.
- Supply Chain: Typically, a direct offshoot of Operations, Supply Chain departments are responsible for managing the flow of goods, services, information, and finances from suppliers to customers. The CSO plays a critical role in the Supply Chain department’s sustainability efforts by ensuring that the company’s practices are suited to minimize their environmental impact. Some of the ways that the Supply Chain department can support sustainability include:
- Implementing environmentally friendly and sustainable practices in logistics, such as optimizing transportation routes, using environmentally friendly modes of transportation, and reducing emissions.
- Evaluating and selecting suppliers based on their sustainability performance, such as their environmental and social practices.
- Collaborating with suppliers to encourage the adoption of sustainable practices and improve their sustainability performance.
- Managing inventory and reducing waste through practices such as just-in-case resilience programs and reducing overproduction.
- Integrating sustainability considerations into supply chain processes and decisions, such as through life-cycle assessments of products and services.
- Marketing and Communications: The focus of marketing is to create awareness for a company, then positively shape the attitudes of potential and current customers. Those customers can be external, or internal stakeholders. For the CSO, marketing and communications are vital to the success of their sustainability mission. The CSO will lean on marketing to:
- Communicate the company’s sustainability message and initiatives to customers, stakeholders, and the public.
- Promote sustainable products and services, such as those made with environmentally friendly materials and produced through sustainable processes.
- Incorporate sustainability into branding and marketing campaigns, such as by highlighting the environmental benefits of products and services.
- Conduct market research to understand customer attitudes towards sustainability and incorporate that information into marketing strategies.
- Human Resources: This is where all responsibility for managing the company’s employees and workplace culture. The CSO, in cooperation with HR, plays a crucial role in a company’s sustainability efforts. By promoting sustainable practices and behaviors among employees and incorporating sustainability into HR policies and programs, the CSO can ensure the company and its employee partners are adhering to sustainability protocols. The CSO can help HR support those goals by:
- Developing and implementing sustainability training programs and initiatives to educate employees on sustainable practices and behaviors.
- Integrating sustainability considerations into recruitment and talent management processes, such as evaluating candidates based on their sustainability knowledge and values.
- Promoting workplace wellness programs and initiatives, such as encouraging the use of public transportation, carpooling, and active transportation.
- Developing and implementing employee engagement programs, such as green teams, to encourage employee involvement in sustainability initiatives, inside the company and outside working with the community.
Ultimately, the goal of a CSO is to increase the long-term value for the company and its stakeholders through adoption and adherence to all sustainable business practices.
Decentralized Leadership in 5.0
Just like we could “feel” the good vibes from leaders we respect, we can tell when leadership is less than stellar. The best leaders we’ve been exposed to, always pointed to their “teams” when good things happened. We know too that sustainability must be a total company effort. Everyone will play a part in hitting mandates and goals. No single actor will be able to accomplish this on their own.
However, we can point to individual leaders who have steered the ship in the wrong direction and tanked their firms. Moving away from pure autocratic, centralized leadership towards team-based efforts that get real results will be evident in the sustainability movement.
We all know bad leadership stories when we hear (or experience) them. They make us cringe, sigh, and shake our heads in disbelief. How is it that a once successful business could be shrinking or even closing its doors for good? You would think that once that happened, every business leader would learn the telltale signs, and avoid them at all costs. However, there is one common link to many a sad story in business, and it starts at the top with marginal “Centralized Leadership”.
Once the world’s largest retailer, Sears Roebuck and Company, was dominant for a century. Starting with a small catalog in 1888, Sears grew to rule the retail industry, and by the 1960s boasted over 3500 stores! Not to mention the literal millions of catalogs sent to homes across the country (those catalogs were the pre-Internet, hard copy version of online shopping we enjoy today)!
However, how many Sears stores do you see today? As of the writing of this article, there are exactly 18 left – according to the ScrapeHero database. How is it humanly possible to deflate a business so completely? The answer? Bad leadership, and more precisely, bad centralized leadership!
Sears faced increasing challenges and competition in the retail industry in the late 20th and early 21st century. The rise of discount retailers like Walmart and Costco, the growth of e-commerce in the form of Amazon, and changing consumer preferences due to the ease of shopping online contributed to the company’s decline.
Efforts to adapt were too little, too late. Sears’ leadership team suffered from frequent turnover (once the ship starts sinking, it’s tough to find good captains!). They also took the “checkbook” approach to save the company, cutting measures like renovations of their stores (many fell into disrepair), divesting higher quality goods for less expensive merchandise, laying off crucial staff members, and decreasing their marketing spending. All the while the retail landscape was changing underneath them.
Sears also made some questionable acquisitions, like Kmart. Nothing spells disaster like gluing two failing companies together to try to save both. In the end, you’re left with one, bigger failing company! On top of that, to collect some quick cash, the company sold off some of its better assets like the credit card division, only pushing them over the edge faster.
How is it possible to make so many bad decisions over and over? The answer is the same centralized leadership structure. The people at the top might have been revolving, but the decision-making process was the same and they were typically out of touch with the rapidly changing retail environment going on outside of their office.
Take a snapshot of the business landscape today and you’ll see a higher attention to environmental stewardship. It’s been gaining ground for decades, but until recently the momentum rarely reached the C-suite on a broad scale. Today we do see many if not most of the Fortune 500 will dedicate C-level executives with “Sustainability” or “ESG” attached to their roles. However, those experienced executives were most likely mid-to-high-level directors 10, 20, or more years ago.
They did not climb the corporate ladder during a boom in sustainability efforts. It might have been on the company radar, but 20 years ago, it was just a small blip.
Contrast that to today’s entry-level managers, who have blossomed during a time when sustainability was a hot topic; they may even hold degrees in sustainability (something unheard of 20 years ago)! They have grown up and matured professionally during a time of eco-consciousness. So, what we are left with is a temporal gap when it comes to the Green Movement.
Regenerative business practices may seem somewhat elusive to those in the Boardroom, while younger generations have grown up with almost a “duty” towards environmental stewardship. We understand that this is a generalization, but our experience in this sector shows that we are certainly over the target here!
The solution? Decentralize leadership and decision-making.
Decentralized leadership (or flat organizations) refers to a management style where power and decision-making authority are distributed from a top central control structure (pyramid org chart) down to mid and lower-tier managers.
Good examples of decentralized leadership include:
- Flat organizations: Some companies, particularly in the technology sector, have adopted a flat organizational structure with minimal hierarchy and a decentralized leadership approach. In these companies, decisions are often made through collaboration and consensus-building, rather than by a single leader or small group of executives.
- Cooperatives: Cooperatives are businesses that are owned and controlled by their members, who elect leaders and make decisions together. This form of decentralized leadership allows for equal participation and decision-making power among all members, rather than having a single leader or small group of leaders making decisions on behalf of the group.
- Community-based organizations: Many non-profit organizations and community groups operate on the principle of decentralized leadership, with power and decision-making shared among members of the community. This approach can help to ensure that the needs and perspectives of all members are taken into account and can help to build trust and participation within the community.
- Virtual teams: In a virtual team, members may be located in different geographic locations, and may not have the opportunity to work together face-to-face regularly. In these teams, decentralized leadership can help to ensure that all members have the opportunity to contribute and make decisions, regardless of their physical location.
To be fully actualized, the sustainability movement cannot be directed by a few empowered individuals at the top of a virtual pyramid. In fact, to date, it hasn’t. Much of the activism towards a more sustainable planet has been carried out by the young amongst us.
It must become a working part of our day and engrained in all of us as participants in the global economy. In the same way that workplace safety has become commonplace, so will the need for sustainability awareness.
Corporate leadership plays such a crucial role in promoting sustainability because corporations have such a significant impact on the environment and society! Typically, the larger the organization, the bigger the impact. Because their decisions and actions can have far-reaching consequences for the environment and for future generations, large corporate leaders carry a large and unique burden.
If a sustainable business model incorporates environmental, social, and economic factors into its operations to minimize negative impacts and maximize positive ones, then it’s paramount that the corporate leaders model that mindset for creating effective sustainability strategies that balance these circumstances.
Leaders need to drive sustainability efforts by setting clear goals, developing, and enforcing policies and procedures that support sustainable practices, and allocating resources to sustainability initiatives. They must also engage stakeholders, including employees, customers, and investors, to promote sustainability values and ensure that sustainability is integrated into the company’s culture and values.
In short, corporate leadership plays the most crucial role in promoting sustainability. By setting the tone for the organization’s commitment to sustainable practices and ensuring that sustainability is integrated into all aspects of the company’s operations, tomorrow’s sustainability champions will lead the way.
Join us in creating a carbon-negative future.