Today's consumers are increasingly demanding sustainably produced products — and they're willing to pay more for such products. Members of Generation Z, in particular, choose brands that are both people- and planet-friendly. Of the consumers from 28 countries surveyed by US-based National Retail Federation last year, 57% were willing to change their purchasing habits to reduce the negative impact on the environment.
Apart from such demand from consumers, organisations have internal reasons to set sustainability goals. The main reasons come down to achieving excellence in environmental, social, and governance (ESG) performance as a means to increase investor confidence, manage business risks, and fulfil an obligation to contribute to the global environmental agenda. Organisations are inclined to set sustainability goals, alongside business goals, to support causes such as mitigating climate change.
But achieving sustainability goals through a set of sustainability professionals is old-school thinking. The new paradigm is to think and do "sustainability" in everything. How organisations can make that happen so that the business is sustainable, consistently and reliably, is something that must be explored.
Critical questions to ask
First, we need to question fundamentals of the business, some of which relate to the organisation's purpose and how the purpose is achieved:
- Does the organisation's purpose fundamentally drill down to shareholder value and wealth creation, or is the purpose bigger and broader?
- Are the organisation's business KPIs separate from other sustainability performance targets, or are they integrated towards a common goal?
- Do sustainability professionals operate in a separate business function to drive sustainability goals, or do business and operations drive sustainability-integrated business KPIs?
If the answers to these questions appear to find fault with your organisation's current approach, it is an indication that the integration of sustainability into your organisation's functions needs further work.
Who are sustainability leaders?
The US-based Sustainability Leadership Institute defines sustainability leaders as "individuals who are compelled to make a difference by deepening their awareness of themselves in relation to the world around them. In doing so, they adopt new ways of seeing, thinking, and interacting that result in innovative, sustainable solutions."
In other words, they are employees who are capable of envisioning long-range sustainability outcomes and are able to strategise and deliver them. They operate with the traits of a business leader, yet they look at the world through an added sustainability lens and drive action towards achieving those goals.
The key strategies explained
Here are five factors to explore in order to harness sustainability leadership in organisations and make sure that capability is sourced, developed, enhanced, and retained.
The initial step of acquiring organisational talent can be pivotal to assuring that the key ingredients of sustainability leadership are given due attention during hiring.
Looking for attributes of sustainability leadership during candidate assessment could increase the likelihood of recruiting the right leaders to drive the business agenda and to ensure that nurturing sustainability skills is a possibility.
What are some of the basic aspects to look for in a sustainability leader? Russell Reynolds Associates, a recruitment firm, suggests a few aspects that can be assessed through open-ended questions and situational responses in candidate screening.
- Sustainability mindset, which is about the candidate's ability to think with a broader purpose and maintain a continuous drive related to the purpose.
- Systems thinking, which is the intellectual ability to see the bigger picture.
- Relationship building, which is about the understanding of and the ability to relate to a diverse environment.
The human resources function could also incorporate the organisation's specific sustainability awareness, as well as the organisation's values, practices, and expectations, into the onboarding process once a candidate is hired.
It is important to understand that sustainability leadership is an attribute that needs to be present in all organisational and business leaders, not just those in sustainability functions. A continual process of cross-skilling, upskilling, and re-skilling is needed to get everyone thinking and working toward the sustainability goals. This is an investment organisations need to be willing to make to keep the skill levels up to date and ready to be applied in practice.
Ensuring that individual learning and development plans capture the skills gaps is a formal way to ensure that skills development can be organised through training, exchanges, secondments, or continuing professional development (CPD) schemes. While plans could be put in place to acquire those skills, assessing the effectiveness of these trainings is also crucial. This can be done as a part of annual performance reviews of employees.
Integrating sustainability into daily business practice is the true value of sustainability leadership, but this is also the biggest challenge.
Business functions will need to modify their business as usual to include a sustainability aspect, and this has to begin from strategy. Setting long-term plans, goals, and targets to achieve improved business performance, while moving to another level with sustainability performance, is not only necessary but also crucial. One of the common examples among businesses is to have a set of operational improvements or projects to reduce carbon emissions. Other sustainability practices are substituting raw materials, factoring inputs for production with ethically sourced material, and replacing traditional raw material with recycled or recovered content, while assuring product quality standards and adopting product packaging designed to be regenerative after use.
Developing expertise to carry out these strategic changes could be daunting for businesses. This specialised expertise can be sourced externally at first, but the long-term goal should be to build a knowledge and a skill base within the organisation. This is achieved through making domain/functional expertise and specialised sustainability skills transferrable across business units and projects. Setting new career paths and professional development goals that encourage multi-skilling and cross-skilling is a critical aspect to consider in pursuing this.
The motivation for action of the general workforce is closely linked to what a performance management system says in a typical organisation.
Having a clear statement on what performance means by elaborating requirements that capture sustainability elements would spotlight its importance to the organisation. This means stating what actions are preferred and what behaviours are encouraged, and clearly communicating these expectations. As an example, a procurement professional should still be rewarded during his or her performance review for choosing an ethically sourced product, even though procurement cost could be affected, and a construction project manager who chooses to use a recycled material and reduces material cost could be rewarded for initiative, innovation, and cost reduction.
The performance criteria could be action-driven, outcome-driven, or impact-driven, based on the seniority of positions. Performing the right actions could make a difference for frontline staff in their performance review, while the strategic-level managers can claim rewards for the visible impact they created.
Conversations about career progression need to involve discussion of how leadership attributes should involve different levels of responsibility to drive sustainability principles.
Integration will not be complete without appraising those who do well in their specific decisions, actions, and behaviours that promote the sustainability agenda of the organisation.
Organisations can reward employees who attempt to incorporate sustainability into business decisions. An example of this is a procurement approach referred to as "procurement for innovation", where the organisational objective to encourage innovation is incentivised through suppliers, by having sustainability thinking incorporated in the supplier selection criteria. This approach is practised widely in the UK for encouraging sustainable procurement by public organisations.
Welcoming initiatives and projects towards sustainability and rewarding and incentivising them through career advancement, recognition, or monetary rewards would be another desirable aspect. Encouraging employee-initiated innovation, especially from nonsustainability-oriented functions and rewarding such innovative ideas would be a great way to go.
How to know whether you are there yet
During this progressive path to integrate sustainability aspects, the idea is to embed sustainability into the business in a way that no one feels they are doing something out of their job scope. In such an organisation, innovation that achieves sustainability outcomes is encouraged, appreciated, and rewarded. This is an intermediate landing that organisations should aim to achieve.
A mark of success is to have a highly skilled and enterprising set of organisational professionals who are able to envision sustainability outcomes. This can only be achieved by building employees' capacity and empowering them to act as leaders to drive sustainability in the long run.
— Mayuri Wijayasundara, CGMA, CPA (Australia), Ph.D., is a lecturer in engineering management at Deakin University in Melbourne, Australia. She focuses on industry-relevant business and policy research on enabling sustainable business and industry practice. To comment on this article or to suggest an idea for another article, contact Alexis See Tho, an FM magazine associate editor, at Alexis.SeeTho@aicpa-cima.com.