Five rules for driving sustainable business leadership
Steve Howard, co-Chair, the We Mean Business coalition
In the space of a few short years, sustainability has gone from a nice-to-do to a must-do. It’s a megatrend that will only strengthen further, and one that companies around the world are engaging with more and more.
One of the key reasons for this increased business focus on sustainability is the sheer scale of our modern global economy and the growing pressure that the world’s eight billion people put on our shared resources.
During my lifetime, the global economy has grown 40 times, and the impacts of that change on the natural environment are increasingly being felt. Carbon emissions are on the rise again, reaching an all-time high in 2018. And, as shown by the Intergovernmental Panel on Climate Change’s special report on the impacts of global warming of 1.5C, reaching the goals of the Paris Agreement requires urgent and radical decarbonization at an unprecedented scale. Meanwhile, more than a billion kilograms of plastic are now produced each day – more than double the rate of just 10 years ago.
The expectations on companies to act on climate change – from regulators and employees to customers and society at large – are growing, too. There’s a real sense of urgency around environmental problems and how to solve them, particularly climate change. We’ve seen this most recently with the student strikes, inspired by Greta Thunberg. Hundreds of thousands of students in more than 2,000 cities have been putting down their books and taking to the streets in peaceful marches against the lack of climate action. We can see a new level of activism with direct action organisations like Extinction Rebellion. Investor pressure is growing.
As businesses, we have to act decisively and demonstrate leadership in the face of this unprecedented challenge. But what does sustainable business ‘leadership’ look like? Below are five simple rules for business leadership, which together can help future-proof your business and drive the level of progress required to meet the goals set out in Paris.
Own your impact
You have to own your impact and if necessary recognize that the fundamentals of your business may need to radically change. There should be no excuses. If you make it, sell it, or profit from it, you are either part of the environmental problem or part of the solution. Transparent disclosure of business impacts together with a clear commitment to transform your business are now the only way forward.
The first step to achieving that is by mapping your company’s existing footprint.
On climate, this can be swiftly followed by setting a science-based emission reduction target – it’s no surprise that virtually all of the corporate contributors to this report have set their targets in line with climate science as a way to future proof their growth. And then you should assess whether the company’s plans fully take into account climate-related risks and opportunities, through adopting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
When it comes to radical change at the fundamental level, all business leaders need to look to the company’s core products and services. This is not about semi-philanthropic activities that are separate from the main business, like planting a few trees. This is about our core impacts as businesses and making sure they are consistent with a world that’s striving to limit global warming to 1.5°C.
Look for long-term value
To be an effective sustainability leader is to look at how you build true long-term value. Too many businesses focus on defending the status-quo and look ahead in months rather than years and decades. Focussing on long-term value creation can unleash the innovation and investment and provide a powerful purpose for your business.
This could be an auto manufacturer moving from the internal combustion engine to electric drive train, such as Volvo’s commitment to phase out pure gasoline cars after 2019. Or an energy business shifting from coal and gas to renewables. These are large and complex transitions that take time, but business can either grab change with both hands and create value or it can deny change and try and ignore it. To state the obvious: if we’re going to reach a net-zero carbon world by mid-century, there needs to be a deep and radical decarbonization. We must look for opportunities in our businesses; to reinvent products and services to be carbon positive or radically low-carbon.
Go all-in
Achieving Mission Possible is about setting ambitious stretch-targets that drive the development of the business in the future. I am a big fan of 100% targets as they create complete clarity around the future you are committing to.
Back in 2014, US food and drink giant Mars showed leadership on renewable energy by becoming the first US company to join RE100, together with The Climate Group and CDP – alongside my old company IKEA and long-term climate champion Swiss Re. For Mars, this was a bold and challenging commitment to take on because they didn’t know all of the answers at that stage, but they knew they were determined to find them.
Today, the company is using or purchasing renewable electricity to cover all of its operations in Belgium, Brazil, Lithuania, the UK and the US. It also last year secured a deal to deliver 100% of the electricity needed to power its Australian operations by 2020. That’s progress. At the time of writing, more than 550 companies have committed to or already set science-based targets which are aligning long-term plans with the goals of the Paris Agreement.
This includes companies from high-emitting sectors such as the Indian steel producer Mahindra Sanyo Special Steel and the world’s largest shipping container company Maersk. For the latter, committing to science-based targets is part of its long-term vision to be net-zero by 2050, which really is shaking up the industry and redefining what’s possible. When you go “all-in” for sustainability, you focus on the future you want to create and unlock innovations you may not otherwise have thought about.
Innovate with intent
Embracing innovation is a vital component of business leadership. You should look to take calculated risks and create space for change. To properly address climate change, we’re going to need dramatic changes across all pillars – and we’re going to need them at scale and speed. That’s going to require all companies to be focused on sustainable innovation.
Typically, radical innovation is seen as the preserve of small companies and startups, but large companies can also drive innovation to scale. One such example is Ikea’s role in developing the LED market. At the beginning of this decade, LEDs accounted for less than 1% of all lighting sales. By the end of the decade, that figure will be more than 60%.
That change was in part driven by IKEA and Signify (then Philips Lighting) setting aggressive targets to rollout LEDs and backing the new, less energy intensive technology. IKEA reached 100% LEDs in lighting sales by 2015. It’s about forcing the pace of innovation and both of these companies benefited from the move because they were leaders rather than laggards.
Today, more and more companies are answering the resounding call for urgent action; re-thinking the fundamental purpose of the company, setting bold targets and then delivering on them.
Embrace complexity
Many sectors require changes not just from your business, but from local and national governments; from supply chain partners, customers and financiers. As the expression goes, success has many parents and failure is an orphan. All of us can fall back on excuses of complexity, expense and lack of appropriate government policies and incentives. But our responsibility as business leaders is to help drive the discussions that ensure we have the context and the policies that allow us to transform business processes.
More and more businesses are actively engaging in coalitions, initiatives and sector working groups that help them navigate this complexity by finding shared solutions and driving greater climate ambition and action – several of which are referred to by other contributors within this report.
The World Business Council for Sustainable Development’s (WBCSD) Transforming Heavy Transport initiative is a great example of collaboration in action; bringing together different stakeholders from fuel suppliers to logistics companies to build the markets necessary to tackle some of the hardest-to-abate emissions, such as those from aviation. Leadership is a mindset, there are no excuses for inaction.
Leadership is about embracing challenges and turning them into opportunities – that’s how we close the action gap.
Our high-carbon past is a very poor indicator of the future and the boldest course can actually be the safest course during these times of accelerating change. Taking a defensive approach and backing away from the changes needed is like the ‘King Canute’ approach to tidal management – you can only hold out so long.
- This article was first published in the Edie Mission Possible 2019 report >
Steve Howard is a leading sustainable business professional and a recognised authority on sustainability and climate change. In addition to chairing We Mean Business, Steve is on the administrative board of SE4ALL and, until recently, was Co-Chair of the World Economic Forum’s Global Future Council on Environmental and Natural Resource Security. Steve is currently advising a range of businesses and financial institutions on transformational approaches to sustainability.
Steve was previously the Chief Sustainability Officer at Ikea and served on IKEA’s executive group management from 2011-2017. Prior to Ikea, Steve was Founder and Chief Executive of The Climate Group and earlier in his career he worked for WWF where he established the Global Forest and Trade Network, chaired the UK Forest Stewardship Council and helped launch and chair The Forest Trust.