21 Jul. 2016 | Comments (0)
Continuing our series of posts from last month’s release of The Seven Pillars of Sustainability Leadership, today we consider what leadership on corporate social responsibility and sustainability from the CEO looks like.
The actions CEOs have taken to demonstrate leadership on sustainability can be characterized by some of the following traits:
• Prioritizing long-term growth over short-term profits The chasm between upholding the principles of sustainability and reporting positive financial results quarterly is one not easily bridged by publicly listed companies, but there are signs that companies may begin to steer away from this approach. For example, a recent letter to more than 500 companies from the CEO of BlackRock Inc. urged CEOs of leading companies to stop offering quarterly earnings guidance and increase their focus on long-term goals, and when Paul Polman became CEO of Unilever in 2009, he immediately announced that he would stop issuing earnings guidance and end full quarterly reporting.
• Setting ambitious CSR/sustainability goals that “stretch” the organization For CEOs of leading companies, incremental improvements in sustainability reporting or in footprint reduction are not sufficient. They want to drive bold action—and normally do it by setting what Jim Collins, co-author of Built to Last: Successful Habits of Visionary Companies, coined as Big Hairy Audacious Goals. These goals—often with uncertain probabilities of accomplishment and with target dates typically at least 10 years into the future—purposefully stretch an organization and create a sense of urgency.
• Realizing CSR/sustainability as a driver of innovation and business opportunities CEOs at the forefront of sustainability recognize that many of the challenges posed by environmental and social pressures actually represent significant business opportunities. These CEOs see sustainability strategies as an opportunity to refocus a company’s business to meet emerging societal needs. Industry leaders such as GE and DuPont, for example, invest about half of their R&D budgets in environmental innovations..
• Promoting radical transparency Consumers are becoming increasingly interested in knowing more about the companies they buy from and what goes into the products they consume. Stakeholders are also exerting greater pressure on companies to disclose information about their operating practices and supply chains, especially given that the vast majority of companies’ environmental and social impacts occur in their supply chains. Rather than fighting this trend, some CEOs are leveraging transparency as a powerful competitive advantage..
• Embracing business model transformation A handful of CEOs on the leading edge of sustainability actually embark on a personal mission to transform their companies—and in some cases their entire industries—to align with sustainability principles. These CEOs recognize that the business models of the companies they lead are at risk of becoming irrelevant in a low-carbon and resource-constrained future. Since for many companies this threat is not necessarily imminent (though still significant), it takes a visionary CEO to challenge a status quo that may be difficult to deviate from. However, CEOs need strong support from their board of directors as transformational leadership can otherwise be a risky proposition.
About The Seven Pillars of Sustainability Leadership
What are the key business practices that define leadership in corporate sustainability? What steps can companies take to become leaders in corporate sustainability? This report examines a distilled set of practices that senior executives identify as most indicative of leadership in corporate sustainability, provides background and context for each of these top practices, and offers practical examples from companies that apply them. Because it focuses on a prioritized list of practices, the report can serve as a guide to help company leaders direct their sustainability efforts where they are most impactful and ultimately enable leaders to embed a culture of sustainability leadership within their organizations. Members of The Conference Board can download a copy of the report for free by clicking here.