Sep 25

Sustainability Is Top Of Mind Of Business Leaders

Heinz Landau
Heinz Landau is a seasoned business leader who has gained valuable working and leadership experience on three different continents.

A huge majority of CEOs worldwide (93%) say that sustainability will be critical to their company’s future success. Despite the recent economic downturn, leaders are more comitted to sustainability than ever before. These are the headline findings of a study among nearly 1,000 CEOs, business leaders, members of civil society and academic experts making it the largest CEO survey on sustainability of its kind to date. The study was conducted by United Nations Global Compact and Accenture and is titled ” A new era of sustainability: CEO Study 2010″. The UN Global Compact is a voluntary organization whose aim is to get companies around the world to align their strategies and operations with the universal principles in the areas of human rights, labour, environment and anti-corruption.

While during the last Global Compact survey in 2007, sustainability was just emerging on the periphery of business issues, in 2010 sustainability is truly top of mind for CEOs around the world. Today’s CEOs are more convinced than ever of the need to embed environmental, social and corporate governance issues within core business. They are also convinced that good performance on sustainability amounts to good business overall. The imperative to act has shifted from a moral to a business case.

An impressive 81%  of CEOs (up from 50% in 2007) have made sustainability part of their company’s core strategy. The main factors driving the CEOs to take action on sustainability issues are 1) brand, trust and reputation (72%), 2) potential for revenue growth / cost reduction 44%) and 3) personal motivation (42%). The fact that almost every second CEO stated personal motivation as a main driver, gives me hope that CEOs will walk their talk.

However, there are also downside barriers to achieve sustainability goals, like the complexity of implementing a business strategy across business functions (49%), competing strategic priorities (48%) and the lack of recognition from the financial markets (34%).

How long will it take before the majority of companies worldwide reach this new era in which sustainability is fully integrated across their global business footprint? 54% of CEOs surveyed feel that this tipping point is only a decade away. And 80% believe it will occur within 15 years – an optimistic view unthinkable in 2007 and testament to the sea-change taking place.

The ways in which CEOs are addressing sustainability issues are also changing. The study reveals three key ways in which approaches and strategies are shifting as we move toward a new era of sustainability:

a) The consumer is (or will be) king

Consumers, customers and governments are increasingly driving a company’s strategy for developing sustainable products and services. CEOs consider consumers (58%) their most important stakeholders, even above employees (45%) and governments (39%).

b) Importance of technology and innovation

Leading edge technologies are playing a critical role in advancing the sustainability agenda – in areas such as climate change, renewable energies, energy efficiency etc. and in terms of increased transparency through social media platforms.

c) Collaboration is critical

CEOs realize that today’s global challenges are too broad and too complex to master them alone. Therefore, 78% of CEOs believe that companies should engage in industry collaborations and multi-stakeholder partnerships to address development goals.

Another important aspect is that CEOs acknowledge that a new generation of leadership and concerted efforts to shape a corporate culture supportive of the goals of sustainability are essential.

Another important aspect is that CEOs acknowledge that a new generation of leadership and concerted efforts to shape a corporate culture supportive of the goals of sustainability are essential. It is very good news indeed that CEOs also recognize the need to increase their own efforts to engender the right skills and mindsets in their managers and future leaders. Furthermore, they intend to work with business schools and educators to shape the next generation of leaders.

Two weeks ago, I was pleased to read in a German business magazine an interview with Sally Blount, the new Dean of Kellogg School of Management at Northwestern University. She stated that one of her top priorities is to educate, train and grow leaders that are not only capable of leading strong, crisis-proof companies, but also take care at the same time of the well-being of society as a whole.

On the other side, I was very surprised and disappointed when I read last month an article in the Wall Street Journal by Aneel Karnani, an associate professor of strategy at the University of Michigan. His article is a case against CSR (=Corporate Social Responsibility). It reminds me of the outdated CSR-view of economist Milton Friedman expressed in a Times magazine article in 1970. Karnani argues that social responsibility is a financial calculation for executives. Surprisingly, despite being a professor teaching strategy, he gets it totally wrong and does not recognize the significant strategic importance and value of CSR when fully integrated into the DNA, the culture, the strategy and the operations of a company.

Let me state a few benefits of a highly integrative CSR – approach that I have observed over more than a decade at my previous company:

- it provides meaning to employees (a very important aspect that is often neglected)

- it increases employee and customer engagement

- it emotionalizes the brand, strengthens the reputation and enhances trust with all stakeholders

- it differentiates the company from the competitors

- it is an important factor in attracting and retaining top talent

Fortunately, there are a lot of companies that are run by executives who do see the strategic importance and the value-generating aspects of CSR. As we have seen from the CEO sustainability study, the modern era has never before seen such a high level of executive commitment to the environmental, social and corporate governance agenda. Now, executives have to follow through on their words. They can be sure that they will be closely watched by all stakeholders for years to come.

This entry was posted on Saturday, September 25th, 2010 at 13:37 and is filed under Corporate Social Responsibility, Human Resources, Leadership, Management. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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