In Search of Transformational Leadership on Sustainability

Photo: Richard Eriksson / Flickr
Photo: Richard Eriksson / Flickr

A recent CEO study on sustainability conducted by the UN Global Compact and Accenture – the third one of its kind – reached out to more than 1,000 executives from 27 industries in 103 countries around the world, asking for their views on the past, present and future of sustainable business. This largest-ever CEO study on sustainability offered a mixed picture of global movement in the positive direction juxtaposed with the frustration over slow progress.

In the previous edition of this study, conducted in 2010, CEOs were optimistic that sustainability – understood as the active management of social, environmental, and governance issues as a part of core business – would soon become a norm embedded into operations of companies worldwide, with leadership on sustainability incentivized and rewarded. In 2013, 63 percent of CEOs still expect sustainability to transform their industry within five years and 76 percent believe that embedding sustainability into core business will drive revenue growth and new opportunities. However, the predominant feeling is that global business efforts on sustainability may have plateaued, and despite deeper awareness and commitment levels many business leaders deem the pace of change and the scale of impact insufficient.

The report notes that,CEOs see business caught in a cycle of ‘pilot paralysis’—individual, small-scale projects, programs and business units with an incremental impact on sustainability metrics—and while they see a role for business in promoting sustainable development, their responsibilities to the more traditional fundamentals of business success, and to the expectations of markets and stakeholders, are preventing greater scale, speed and impact.

Such views are not surprising given a prolonged recovery from the global financial crisis that pushed businesses to focus more narrowly on the bottom line.  And the lack of solid metrics tying sustainability to business performance isn’t helping. In 2007, just 18 percent of surveyed CEOs reported that they perceived no link between sustainability and business value.  In 2010, this number rose to 30 percent, and this year to 37 percent. Changing that trend requires a shift of the context in which companies strive to be good corporate citizens.

The surveyed CEOs envision a significant role for national and local governments in re-shaping the landscape for sustainability: 83 percent of them see the need for greater efforts by governments and policymakers to provide an enabling environment for the private sector as integral to advancing
sustainability, and 85 percent demand clearer policy and market signals to support sustainable growth.

Yet, leading companies are not waiting for policymakers to act. CEOs of companies that successfully combine sustainability leadership with leading business performance measured by traditional metrics (revenue growth, profitability, and shareholder returns) shared these key lessons:

  1. Realism & context: Firms need to understand the scale of the challenge and the opportunity for growth based on sustainability.
  2. Growth & differentiation: The urgency of global challenges provides a business incentive for turning sustainability into advantage and value creation.
  3. Value & performance: While tracking progress of sustainability initiatives and quantifying their benefits may be hard, it is a must since only “what gets measured gets managed.”
  4. Technology & innovation: Innovative companies turn sustainability challenges into new models for success.
  5. Partnerships & collaboration: CEOs increasingly recognize that new challenges require new solutions and companies can maximize their impact through  partnerships with governments, policymakers, industry peers, consumers, and NGOs.
  6. Engagement & dialogue: Rather than acting first and then communicating, CEOs are broadening the conversation by engaging other stakeholders.
  7. Advocacy & leadership: Business should lead the way toward defining and delivering a sustainable global economy, but companies need to play a part in shaping future global systems by working together with governments and other stakeholders.

The UN Global Compact can be an important platform for replicating individual company successes and scaling them up. The Compact unites stakeholders  around 10 sustainability principles, and now comprises nearly 8,000 companies and 4,000 civil society organizations, making it the largest corporate sustainability initiative in the world. Collectively, its members have the power to provide the kind of global leadership on sustainability that is currently lacking.

Anna Nadgrodkiewicz is Director of Multiregional Programs at CIPE.