Sustainability Leadership is a Profession – Why you shouldn’t entrust your dentist removing your appendix

A little more than ten years ago, prior to launching a block-buster potential product into the General Practitioner’s segment, I heard the then CEO request his leadership team to show him every (!) new hire CV over the next few weeks, as he knew the organization would need to grow accordingly. And while this might be an extreme, it sent a clear signal to the organization that experience, and qualification mattered for such a launch. This product still sold north of 4 bn USD in 2022.

Experience and qualification matter, otherwise why would one consult therapeutic experts for designing clinical trial interventions or why would one appoint certified auditors to assure financial statements, if it wasn’t for their expertise and accreditation? However, when it comes to sustainability leadership, we still largely entrust people from the communications department or loyal corporate veterans to do the job.

In a recent HBR article Robert Eccles and Alison Taylor wrote: “Historically CSOs have acted like stealth PR executives - their primary task was to tell an appealing story about corporate sustainability initiatives to the company’s many stakeholders, and their implicit goal was to deflect reputational risk.” That goes well with the assumption that some philanthropic efforts or “programs” can be announced and quantified from an input only perspective, i.e. announcing the amount allocated to “give back”, assuming that money paired with good intent did the trick.

“If you compare sustainability disclosures alongside a company’s annual report, you often get the impression that you’re reading about two entirely different companies.” (Eccles and Taylor cf. above).

But such an approach might even cause harm, despite the good intent and investment, for example when:

• An organization realizes that its free of charge products are informally being sold and stored under conditions hampering their quality and thereby their efficacy
• An organization celebrates having reached its millionth patient with a lifesaving intervention when in parallel the corresponding WHO report indicates overall mortality significantly increased
• An organization praises itself about equitable pay, while its employed single mums leave the organization because of its strict return to site policy
• An organization transfers manufacturing steps to a different country with less direct CO2 footprint, but overlooks that the new local workforce is using their disposable income less environmentally friendly than the workforce from the previous country, potentially even causing a net negative effect through such induced CO2 levels

That said, sustainability of the firm is more holistic and inextricably linked to the core strategy. Identifying environmental or societal issues – often linked to market failures –, aligning well-disposed stakeholders and resources to addressing these issues, transparently communicating objectives, obtaining feedback actively, refining the approach and gradually removing obstacles und thus unlocking future markets is what increases the odds of a more sustainable financial profit mid- to long-term. Therefore, if the sustainability agenda is something that is inextricably linked with the business model of the company, then such an agenda has a lot to do with evolving and possibly changing the business model and with managing across functions and layers of an organization rather than announcing from the top.

Andre Taylor in his article describes it as follows: “Sustainable Leadership is a style of management that drives solutions for environmental, social and economic challenges in the world. It recognizes leadership as a process of influence and breaks down silos to combine efforts towards change and transformation.” That nicely links with a definition of George Serafeim in his recent working paper “ESG: From Process to Product”: “ESG (Environmental, Social, and Governance) is a process that involves measuring relevant resources and outcomes, analyzing resource allocation to achieve optimal outcomes, managing resources to improve outcomes, and communicating resource management and outcomes to stakeholders. It can be implemented by any organization to align with their purpose and strategy. All investment managers, could adopt ESG as a process to the extent that the measurement and analysis of specific ESG issues, mitigates risk and identifies growth opportunities.”

That makes it clear that sustainability leaders should display characteristics and relevant experience along the following leadership dimensions:

• Having a track record of governing both external and internal stakeholders behind a common goal
• Navigating complexity in multidimensional business contexts, leading as a facilitator
• Being principles- and purpose driven with the flexibility to adjust leadership style
• Being innovative regarding triple bottom line approaches; optimizing trade-offs between People, Profit and Planet
• Thinking long-term based on resilience and courage

Therefore, one should start to think of sustainability leadership as a profession, from the Latin word “profiteor”, to avow oneself. That would mean a combination of relevant experience paired with most of the above-mentioned leadership dimensions. For example, experiences like

• Social business model innovation and launch
• Reimagining supply chains netting higher volume societal externalities with environmental potential environmental risks
• Authentic communication approaches that admit failure
• Development and implementation of a sustainability linked internal talent development and short-term assignment marketplace with HR
• Leading and establishing transparent societal outcomes monitoring and evaluation as well as reporting
• Contributing to Financial-Environmental-Societal financial integration development

Such a sustainability leader will actively surface dilemmata, manage trade-offs and discuss and align on them. Consequently, companies would need to invest into cultural change to establish a resilient governance framework, as less trained organizational muscles will have to be provoked, stretched and strengthened. Such investments would pay off, as they could lead to more inclusive supply chains, to breaking down carbon neutrality ambition into annual environmental targets, to engaging in new forms of public private partnerships that have the potential to open doors for business opportunities going forward, to earning credibility through transparent reporting and to being open to input from external stakeholders. Last not least, these adaptations and investments would attract and retain a workforce that is ever more concerned about how serious its employer takes impacts on people and planet.

Precisely because we would not trust our dentist to remove our appendix, we will see more efforts that go beyond communicating investments and good intentions, as is increasingly required by regulators. The focus therefore will shift away from pure (financial) risk mitigation and activity reporting to identifying adjacent business opportunities for mid-term growth through addressing inherent environmental and societal issues at the same time.

Some undertakings will just implement an approach, which will more systematically link strategy with sustainability communication and reporting, trying to leverage cookie-cutter approaches from advisors, while other undertakings will be more sincere and build on input and experience from sustainability leaders as described above. Those organizations will, sometimes based on experiences they made long ago already, create opportunities for sustained growth based on the creativity and intrinsic motivation already nested in their employees. For that, these organizations will reimagine and adapt their business models accordingly. Fortunately therefore, with the CSRD and further regulations coming into effect, it will become much easier for all stakeholders to differentiate signal from noise.?