Leadership and governance are vital in the transformation towards sustainability

planet vs profit

Various reasons for starting to consider social and environmental sustainability performance have been put forward to me by companies during the course of my research and advisory work. They fall into two increasingly converging camps – ‘it’s the right thing to do’ and ‘it’s good for business’.

Managers who talk about what state the planet might be in when their grandchildren grow up fall into the first camp – ‘it’s the right thing to do’.  This is a good place to start, but unless it’s translated into business outcomes it won’t get much traction – particularly with the Chief Financial Officer whose support is critical in getting a budget allocation.

The big banks have elaborate Corporate Social Responsibility (CSR) programmes because they know that they attract the best graduates.  They probably fall into the second camp – ‘it’s good for business’. I say ‘probably’ because they don’t say much publicly about having a responsibility to do this anyway and still haven’t figured out a way to account for the outcomes of their CSR programmes.

Companies who make the most progress towards sustainable practices have leaders who believe that the right thing to do is good for business.

There are three key factors influencing the degree to which an organisation integrates sustainability and all three are about leadership:

1. The strength of commitment and leadership qualities of the CEO

If sustainability initiatives are to succeed, the CEO must believe it is the right thing to do and that business should do the right thing. She needs to have the foresight and courage to see that doing the right thing is good for business.  Her moral conviction must be strong enough to convince others to follow.  (Most employees will want to follow a sustainable path if that is where they are led. Being part of a team which is taking a sustainable path will be a source of great satisfaction to many.) The CEO has an important role to play in ensuring that the management structures and governance processes are in place and the leadership styles of the executive team are conducive to integrating sustainability.

2. The level of the Board’s understanding of the relevance of sustainability to strategy and risk

The Board sets the strategic direction of a company. If the Board doesn’t recognise the importance of staff, customers, communities or risks associated with the limitations of natural resources and the impact of pollution, change will be limited.  An understanding of these issues on the business model, long term success and ability to deliver on strategy are critical. So too is an appreciation that identifying sustainability risks requires stakeholder engagement.

The Board has an important role to play in holding the CEO to account which in turn makes it easier for the CEO to hold senior executives to account.

The Board has an important role to play in holding the CEO to account which in turn makes it easier for the CEO to hold senior executives to account.  The Board’s Remuneration Committee could chose to seek sustainability performance data to inform its deliberations.

Board diversity, including, but not only gender diversity, becomes really important in ensuring the Board is fit to drive change towards a sustainable business.   Common sense dictates and research has shown that women on boards increase the social and environmental sustainability focus along with profits (see for, example McElhaney and Mobasseri, 2012). Similarly, a boardroom full of accountants brought up to think about financial returns above all else, and with little or no sustainability expertise, is hardly likely to fully comprehend the relevance of sustainability performance to overall performance.

3. A senior leader with the expertise, leadership skills and authority to make it happen

A committed, proactive executive will be needed to make change happen.  They will need to be knowledgeable about sustainability issues, processes, performance management and communication.  If organisations are to change in time to avoid negative (social, environmental and business) consequences, this person needs to be senior enough to have authority. They need to have the ear of the CEO.  Moral authority and leadership skills are important, but not enough for the scale of change required (see also Adams et al, 2011).

The challenges

Competent, committed business leaders will face significant challenges:

– Solving sustainability problems requires working across functions.  This can only happen if the senior team have collaborative leadership styles.  Organisations with clear functional boundaries and hierarchical structures may not have the desirable degree of cross-functional and informal communication channels needed to make sustainability change work.

Encountering inertia and resistance stemming from lack of know-how and already full workloads.  In this situation people focus on what is in their job description and on performance which is assessed.  Support and leadership from the Human Resources team will be needed to get sustainability incorporated into job descriptions and performance review practices.

Difficulty influencing the decision makers and getting sustainability into strategy. Help will be needed from the finance team to develop a business case for sustainability initiatives.

– Getting agreement on Key Performance Indicators and targets and getting sustainability incorporated into plans.

Working with marketing and communications people to ensure that sustainability messages are consistent, prioritised, accurate and above all, not greenwash.

– Developing stakeholder engagement processes to identify material issues and risk.

– Solving these challenges requires corporate leaders who are guided by a sense of what is right. We need self-aware senior executives with collaborative leadership styles working in a culture which allows for critical reflection.

The role of education and research

While a growing number of businesses are calling for graduates who can apply sustainability thinking to business problems, many business schools have been slow to act.  Of thousands of business schools world-wide just over 500 have signed the UN Principles of Responsible Management Education.  In doing so they have committed to addressing this need for change in leadership capabilities through education, research and engagement.

The mechanisms by which universities are funded, journals are ranked and academics are assessed combine to discourage academics from engaging with real problems and communicating their work to those who can act upon it.

Universities and governments have been slow to create opportunities and rewards for inter-disciplinary research without which we cannot find solutions to sustainability problems.  The mechanisms by which universities are funded, journals are ranked and academics are assessed combine to discourage academics from engaging with real problems and communicating their work to those who can act upon it (more on this in Adams and Larrinaga González, 2007).  Academics also need to be guided by a sense of ‘the right thing to do’ or their moral compass (see Howard, 2012).

This was part of the reasoning that led to me founding the Sustainability Accounting, Management and Policy Journal which is published by Emerald. The aim of the Sustainability Accounting, Management and Policy Journal is to find practical and policy solutions to improve the social and environmental sustainability performance of (private, public sector and non-governmental) organisations and societies. The Journal provides a forum for quality research contributions with practice and policy implications concerning the interactions between social and environmental sustainability, accounting, management and policy. It includes opinion pieces from practitioners as well as academic research articles. The journal is endorsed by the Globally Responsible Leadership Initiative (GRLI).

Role of the GRLI

During my involvement with the GRLI from 2006 it has worked to encourage business leaders, academics and their organisations to follow their ‘moral compass’ and do more.  It equips them with the skills required to do so. As GRLI leaders and members we have worked for change in collaboration with the UN PRME, the UN Global Compact and business school accreditation bodies (see Adams and Petrella, 2010).

The GRLI has brought together people from all over the world, from business, NGOs and universities united by a shared goal – to develop the leadership required for more responsible business.

Conclusion

Change towards sustainability is brought about by:

– Individuals with the courage to ‘do the right thing’;

– Organisations with different missions working together to find common ground;

– People from different functions and disciplines working together to solve problems and develop a common language;

– People of different cultures and genders working together and valuing the diversity that brings;

– Creating a collaborative culture where dissenters are heard.

– Change towards sustainability is mostly about people and we can all make a difference – together.

Note

This article was first published on Carol Adams personal website as should be cited as:
Adams, CA (2013) The role of leadership and governance in transformational change towards sustainability Global Responsibility, Issue 9.
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Carol Adams is an author, consultant and Non-Executive Director with expertise in financial and non-financial reporting and environmental, social and governance risks. To learn more about Carol please visit her website or follow her on twitter.