As businesses tussle with the meteor-shower of challenges raining down upon them at ever greater speed, the concept of planning for the end of the week let alone five years ahead may seem ambitious. The mantra that ‘change is the new constant’ may be an irritating truism, but it also means that in order to maintain your position in the marketplace businesses need to be engaged much more closely with all their stakeholders than they have been over the last five or six decades.
This is not just a question of customer-centricity, though that plays its part, it is also a growing awareness that to sustain yourself as a business, you need to adopt a broad ethos of sustainable activities be they environmental, societal or commercial with the eco-system your business operates in.
Matt Gitsham, Associate Professor of Sustainable Development, Ashridge Executive Education at Hult International School, sees that the leadership needed to lead organizations sustainably has evolved considerably over the last few decades, and a very different mindset is now required to lead organizations today.
In the 1970’s and 80’s there was a clear distinction between the roles of government and civil society, and the role of big business. Business then was focused on profit maximization, which essentially meant increasing in scale and minimizing costs. At this time even large businesses were much more domestically oriented; the majority of their sales and certainly the nationality of the senior management being predominantly from the ‘home’ nation. This resulted in these businesses yielding to the rules and strictures of single governments.
Following the trade liberalization of the 1980s and the leaps forward in technology of the 1990s globalization took off. By 2016 the growth of corporations – and particularly Chinese nationalised ones – meant that 24 companies had revenues larger than Argentina, the 26th largest country economy at the time. Over two-thirds of the top 100 global ‘economies’ were corporate ones on the Global Justice Now figures1. Gitsham uses this shift to highlight how large corporations through their globalized growth have removed themselves from local control, and that with their enormous size has come – whether they like it or not – enormous responsibility to act not just in their own interests but in the wider interests of society too.
The 21st Century has seen some organizations embrace this responsibility whole-heartedly. The poster-boy perhaps being Paul Polman’s leadership of Unilever, and the company’s Sustainable Living Plan initiated in 2010, centred on three goals: improving health and wellbeing for more than 1 billion; reducing environmental impact by half; enhancing livelihoods for millions. Unilever were not the first to embrace sustainability, many companies had had that ethos since their founding, and many more are seeing that adopting a wider approach to their corporate mission has direct benefits to their traditional bottom-line results too.
Unilever, like others, have seen that by building more sustainable supply chains and hard-wiring recycling into product lifecycles, while like all new strategies bears an initial cost, can also bring radical efficiencies over the longer-term, reducing both material and energy costs. Putting the focus on CK Prahalad’s ‘bottom of the pyramid’2 has also opened up enormous new markets to the company. The improving health and wellbeing pledge aims to provide clean water and toilets to the 20% of the global population that do not currently have access to them – and in doing so Unilever’s sales have increased while tackling this issue.
The corporate benefits spread wider still though. Research continues to build the picture that Millennials and Gen Z are less motivated by extrinsic factors such as pay and position than their predecessors were, and intrinsic factors such as purpose and values play an increasingly significant role in attracting able talent to work for companies. The ‘employer brand’ is consequently becoming ever more important in enabling the right talent to join businesses.
Matt Gitsham’s research at Ashridge has explored these issues, with particular attention to what it is that gets senior leaders to embrace sustainability as a core strategy. What influences them? Why has Unilever been so forthright about its sustainable ambitions?
A key factor comes down to the background and experiences of the CEO: which parts of the world they have spent time in, who they have known, the values of communities they have been part of, educational experiences, as well as dialogue with critical stakeholders. Neville Isdell, the first non-American CEO of Coca-Cola was the son of Irish anti-apartheid activists, grew-up in southern Africa and trained as a social worker; this combination brought a different perspective to his leadership, and started Coke’s journey into working with its independent bottlers to improving their human rights and environmental record, rather than washing their hands of it, on the basis that the bottlers were not part of Coca-Cola Inc.
The Ashridge research has highlighted that the change needed to shift organizations to more sustainable practices is triggered by a mindset shift – and that shift often happens when a CEO with different breadth of experiences takes the helm. Organizations can make sure they have these kinds of leaders through their leadership development and talent management programs.
Globalization has put many companies into a position where they are out of reach of single government’s jurisdictions, and heightened their responsibility to society as a result. It seems that globalized leaders, who understand the perils much of the world faces from having lived and travelled far from the top-tables is part of the solution too.