A Sustainability Revolution Is Coming, Are Leaders Ready?

The audacious goal of achieving carbon neutrality in the global corporate community is nearing a tipping point. Recent announcements by blue-chip companies surprised some with their plans and timelines around sustainability. In January IBM and PepsiCo announced their goals to achieve net-zero greenhouse emissions by 2030 and 2040, respectively. General Motors also announced they will eliminate internal combustion engines and only sell vehicles that produce zero tailpipe emissions by 2035. Given the long-term nature of sustainability goals, and the significant table stakes surrounding them, the question becomes who can reimagine their organization as a net-zero carbon emitter, and who can lead the journey to get there?

By setting goals with multidecade turnarounds, organizations committing to sustainability are starting an unheralded journey that involves a complete reimagining of infrastructure, operations, and supply chain. The scope and scale of these undertakings are difficult to fathom. Bill Gates recently described the process of achieving carbon neutrality by saying, “The amount of change and cooperation required to address the climate crisis is simply unprecedented.”

Belief in the Vison and Its Value

To find perspective around achieving almost unimaginable organizational goals, consider sustainability as akin to constructing a cathedral. The Cathedral of Santa Maria del Fiore in Florence, Italy, took 140 years from ground break to public opening. Work began in 1296 A.D. under the leadership of the original architect Arnolfo di Cambrio, who envisioned a captivating and bold cathedral in scale and detail. Di Cambrio knew his role was simply to begin the grand edifice, position the right bricks to support future construction, and then pass on the work to people who share the vision.

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To begin building sustainability into their organizations, executives at PepsiCo, GM, and IBM would be wise to identify successors who are resolute in their belief that sustainability is the future and achieving it the most pressing imperative for the business. This requires a leap of faith for many executives who are habituated to focus on short-term financial drivers and meeting the expectations of investors who have not fully internalized the current and long-term financial risks posed by climate change. They may also be numb to the opportunities presented by changing consumer behavior as a result of rising generations more focused on mitigating climate disaster.

Culture Eats Sustainability for Breakfast

Cultural norms fundamentally determine what is a priority, and what is not. The top of the corporate hierarchy will not be tackling this challenge in the trenches of infrastructural change, but they will set the tone for those leaders. Executives launching sustainability goals must meticulously craft the culture by consistently communicating priorities, guiding principles, and decision rights. This will be key to empowering future executives on the path to sustainability. Consider dysfunctional cultures driven by short-term profits that resulted in disaster, like BP’s Deepwater Horizon or Volkswagen’s emissions scandal. Conflicting priorities in sequences of decisions led to not only total failure but actions that fundamentally negated long-term sustainability goals in favor of short-term profits.

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Establishing the right culture to achieve sustainability is not about the norms in the C-suite; it is about the people who will make decisions every day to align the business with that objective. Giving unwavering priorities around sustainability to mid-level leaders takes the ambiguity out of competing priorities and resource allocation. “Commonly, all the sustainability goals are written down, but when it comes to the day-to-day decisions, executives are frequently not involved. As a result, these goals must be ingrained in the company culture.” Says Todd Cort, Yale School of Management Lecturer in Sustainability. “You have to make really clear priorities for leaders to make sustainability-related decisions. Moreover, leaders can embed sustainability processes, like investing capital costs in sustainability goals. This ensures successors have difficulty deviating.”

Leading Companies Towards A Sustainable Destiny

A critical step in moving towards sustainability is to determine whether a company has the right enterprise collaborators to drive large-scale changes, while also keeping organizational friction low. Collaboration has been shown to enhance enterprise-wide judgment and performance and maybe the most critical leader behavior in achieving sustainability. Creating partnerships, even with a competitor, can support short-term earnings while making infrastructure changes quickly. Investing in ‘partnership fixes’ can support broad changes to infrastructure and operations, rather than simply playing ‘hot potato’ with carbon and passing it on to other business units or channel partners – all of which could lead to cultural, branding, and communication risks.

Executives must also set up future leadership teams up for success by creating strategic shared services support to reduce the distraction of administrative work. Instead of bogging functional leaders down, it is critical to give decision makers with significant P&L responsibility the space to think big about innovation. By decentralizing the goal of sustainability, while also centralizing the administrative elements around it, functional leads can invest more of their best thinking and leadership in sustainability-related initiatives.

Who Will Build the Sustainable Enterprise?

There are lessons to be learned from organizations on this journey, beyond the steps to achieving carbon neutrality. Planning for growth is difficult, even when the planet’s health is not hanging in the balance. As executives move beyond the short-term mindset partially brought on by the global pandemic, rethinking the relationship between organizations and the talent they house is an important topic for executives to consider in establishing long-term success. We know the power of talent; however, retaining people who understand the sustainability journey is even more paramount to the ongoing success of companies in the modern age. C-suite teams should consider what their organization needs from a talent perspective tomorrow, and what can be offered to future leaders to retain them today.

Identifying the right C-level talent for the future – people who have both the right outlook around the risks posed by climate change, and the right skills to drive sustainability initiatives – is the most important element of succession planning in the modern age. Breaking with outdated models of leadership, and identifying who leads with a sense of sustainable capitalism, is the most important decision today’s CEOs can make. Doing so could lay the foundation of organizational success for centuries to come.

Source: https://www.forbes.com/sites/beauriver/2021/03/01/a-sustainability-revolution-is-coming-are-leaders-ready/?sh=2bdf57555468

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