How do we get sustainability that can survive bad leadership?

01 June 2016

When we’re assessing what a company has to do to become sustainable, we tend to set the bar pretty high. They have to show great leadership. They have to develop processes that are more efficient than anyone has yet managed. They have to “decouple” growth from emissions. Become net positive. And when they’ve done all that, we might call them a sustainability leader, whilst still noting that they’re only on the journey.

There are good reasons for all of that. But you want to know something grim?

If our future survival as a species on this planet depends on all businesses meeting that high bar for quality of leadership, then we’re well and truly screwed.

I’ve recently asked a few friends of mine who deal with the top bosses of a number of big businesses – how many would they say were well led? The answer comes in at around a third. Which is those that have a decent level of competence. Inspirational paradigm-shifting leadership? Tiny.

So the real question isn’t ‘how do we achieve sustainability?’

It’s how do we achieve and maintain sustainability robust enough to withstand the reality of indifferent and sometimes downright crappy leadership?

We will have to remove once and for all the belief that a CEO has a duty only to maximise returns to shareholders

This is a two-part question, since it also involves political leadership. But let’s focus here on the business component. We can ponder the other element when there isn’t an election going on and we might be able to have a more sensible discussion on the subject than currently seems possible.

What has to happen for us to achieve sustainability that enables businesses to muddle along and still be good enough? Having tried to think of factors that work with the grain of how people are, and don’t require a revolution in human consciousness to achieve - I would suggest the following.

  1. Innovation

Key product categories will be revolutionised by the introduction of products that become the new norm and, in so doing, completely revolutionise what’s possible with vastly reduced impact. The current popularisation of electric vehicles by Tesla is the obvious example of how this can work in practice. The innovation by the leaders will become the new standard.

Once that happens, companies can compete using similar technology. The really badly run ones will simply fail in the marketplace. But the sectors will, overall, have a much reduced impact.

  1. Competition

In those areas where there is a solid business case for action, process efficiency improvements will become the new norm. If you can eliminate waste from your process altogether, which some companies are either doing or at least aspiring to do, then in due course it will become one of those standard process management things you have to do to be competitive.

  1. Social proof

There needs to be peer group pressure amongst senior executives that all leaders of the top companies are expected to play their part. This starts with the most highly respected CEOs and goes from there. We already see how this can work. The most effective CSR membership organisations such as BITC in the UK and BSR in the States use the pulling power of some of the rock star business leaders very effectively to bring up and coming leaders into the fold. It doesn’t yet happen on such a scale to create a new norm of what leaders are expected to do, but it is an illustration of how the dynamic can work in practice.

  1. Access to markets

Some sectors require large retail outlets to provide access to market. The main companies that provide these channels have not always used this power to best progressive effect, but we’re starting to see even mainstream names begin to exercise choice editing based on sustainability factors. For instance, the UK’s Tesco pulled John West products from its stores because of its perceived unsatisfactory action on sustainably sourced seafood. Such a measure would have been unthinkable even just a few years ago. Whilst such retailers will never become wild-eyed activists, their seriousness in ensuring the brands they carry meet the minimum standards can be a significant influencer.

The next two require political action to bring about – something that will become possible once some of the above measures are better advanced.

  1. Raising of regulatory minimum standards

Where best practice technology is introduced that demonstrates what is possible, governments will increasingly be prepared to legislate to make the best practice of today the minimum standards of tomorrow. Indeed, in some cases they may even legislate today to phase in tomorrow minimum standards that cannot currently be met. We saw this in the past, with the announced phasing out of CFCs because of their harmful impact on the ozone layer. Knowing that the ban was coming, companies were forced to focus their innovation on viable replacements.

We may not see that degree of urgency in the future (although a series of attention-grabbing climate events might well mean that we do). But certainly mandating the current best as the new standard seems an easy win for most governments when faced with the expectation that they should “do something useful”.

  1. Change the legal requirements of companies to embrace certain key elements of B Corp status

Great leaders today can tell their shareholders that they’re managing their business for the sustainable long term, and if they don’t like it they can go invest somewhere else. So long as the business is performing well in the marketplace, they can even get away with it.

But everyone else will follow the incentives and expectations that are placed upon them. Sooner or later, we will have to address this, and remove once and for all the misperception that a CEO has a fiduciary duty only to maximise returns to shareholders. The context of doing so within the expectations of sustainable outcomes will eventually need to be framed as a legal requirement.

Number 6 is the one that is the biggest leap from where we are today, but it’s still conceivable that we would see it happen. Once expectations have begun to shift about what the norm of how businesses behave actually is, a few high profile examples of bad apples might well provide the prompt to produce clarity on what society expects. It will also help if bigger and bigger companies register in the short term as B Corps and prove that they can thrive and compete with the old-style companies.

If we achieve the six measures described above – will we definitely achieve a sustainable future?

Really, I have no idea. It depends on the detail. How startling is the innovation? (Tesla-style innovation for air flight seems a long way off, but we’ll know we’re on the way once it arrives) How cohesive is the senior peer culture? How disruptive are the forces that will fight against change?

But it does at least suggest that we still have everything to play for.