The Leadership required for Sustainability.

The leadership required to change a company to embrace Sustainability.

CSR gives a competitive advantage

For most companies Sustainability should have seized to be a marketing tool. There is sufficient proof that companies with a strong emphasis on CSR (of which sustainability is an important aspect) out perform their peers. This makes sustainability (and the other aspects of CSR) a strategic tool to improve the company.

CSR means fundamentally changing the DNA

It is also clear to most companies that sustainability should be more than window dressing. A company that does not fundamentally incorporate sustainability into its product and services will not convince consumers and find that its efforts do not bring the returns it feels it deserves.

 

• First of all it should be clear that the company cannot continue doing what it has been doing in a different way. Taking sustainability serious means that companies have to look at the way they do their business in every aspect of that business. The cars driven by its sales people, the number of flights taken by senior management, the energy use of its offices, the extend to which it adheres to the cradle to cradle principle and the complete carbon footprint of its products and services.
• Secondly companies should realise that sustainability is a long process. Management cannot implement a quick top down programme, sustainability has to be incorporated in the DNA of the organisation in a determined and if necessary prolonged move.

Strong modern leadership is required

Embracing sustainability however is not an easy task. It requires fundamentally changing the company and therefore requires strong leadership. This leadership is different from traditional leadership.

5 leadership practices are relevant

1. Use the momentum
2. Change selectively
3. Encourage experiments
4. Create openness and frankness
5. Crowd-source ideas

1. The leader should use the momentum of the current economic slowdown to install the need for fundamental change. He should create an urgency to change what and how work is done and who does it. This is a delicate task as too much pressure can cause panic and inertia, whereas too little pressure will lead to a return to old ways.

2. The leader should only change those things and move those people that prevent the required change; not everything has to be changed.

3. The leader should encourage experiments. The vision does not have to be produced as a Grand Design by the senior management, it has to be the consequence of much trial and error.

4. The leader should encourage a culture of openness and frankness. In many companies the status quo is protected by higher management preventing any sound of discontend or change to surface at the top floor.

5. The leader should mobilize everyone withing the organisation using for instance the newly developed crowd sourcing methods.

Felix Gruijters

Sustainability its example and its deceit

Sustainability and Unilever

Unilever has published its Sustainable living progress report. It has made good progress. Most of the progress really impresses me, like the 24% of agricultural raw materials and 64% of palm oil that are now sustainably sourced.

The fact that 100% of energy is from renewable sources is less impressive as at least some of it is from Norwegian and Swedish hydro sources. We all know that this is nothing but “green washing”. Norway has sold so many of its green certificates (proving that the power was generated by hydro) that one could say that it has, in fact, the dirtiest energy mix of Europe.

But most important to me is the rationale behind the plan. It is a rationale that should inspire all CEO’s to follow Unilever’s lead. Unilever states that it is pursuing its sustainability goals because:
1. consumers want it
2. retailers want it
3. it fuels innovation
4. it helps develop new markets
5. it saves money.
6. it inspires our people
Who would not want his/her company to feel that its strategy achieves all these goals?

It strikes me that all the reasons listed have two sides to them – two sides that can be explained through Unilever’s Dutch heritage. Like any Dutchman, Unilever is both a missionary and a salesman at the same time. Innovation, inspiring employees, developing markets: it is all pursued with missionary zeal in the knowledge that the salesman knows that the market wants it and revenue can be increased.

Sustainability and partnerships

It is also Interesting that Unilever works in partnerships to realise its sustainability goals. CSR business practices require close co-operation with others. Companies cannot do it alone as CSR requires a much more holistic approach to the business. No company can control all the aspects of a-cradle-to-cradle approach effectively and efficiently. Here too Unilever leads the way.

Eneco’s sustainability and deceit

I drove past an Eneco commercial outside Schiphol Airport today. Eneco sells Dutch Wind power and advertises this graphically by a display in which a wind turbine and a washing machine both turn, implying a direct link between the turbine and the energy consumed by the washing machine. We all know this is not true. Today it was great to see that the wind turbine in the display was not turning even though the washing machine was on “full-cycle”. This is the reality: when there is insufficient wind in The Netehrlands, Eneco’s customers still receive power. This power comes from the coal power stations of E.on, Essent, Electrabel and Nuon. It always hurts me to hear and see Eneco claiming it is the greenest producer of power in The Netherlands. It might be true, but Eneco produces such a tiny fraction of Dutch power that this claim does not mean much. Without the coal (and gas) powered generators of its competitors, neither Eneco (nor Greenchoice for that matter) would exist.

Felix Gruijters

Sustainability and organic growth

Sustainability and organic growth

It has always struck me that managers do not really like organic growth. Entrepreneurs of new start-ups do but, when the entrepreneur is replaced by a manager, when the CEO no longer has any commercial background, but is an accountant or a lawyer, the focus seems to shift to mergers and acquisitions and constantly restructuring and reorganising the complicated org-charts.

What is wrong with organic growth? Nothing, it is just difficult to get ever more out of a business unless the business is constantly reinvented, reinvigorated by innovation.
In the May 2012 issue of the Harvard Business Review, Ken Favaro, David Meer and Samrat Sharma (all of Booz & Company) describe how to refocus on organic growth. The article merits reading in detail but let me give you some highlights that are relevant in relation to sustainability.

Sustainability is the new growth market

1. Corporate leaders have to be actively involved in the business. I.e. it is not the right approach to be setting targets in the plush comfort of HQ and demanding detailed reporting on progress. It leads, according to Favaoro and associates, to managers of operational units who “would rather succeed conservatively than fail bravely. This might be good for their careers but does little for growth.” Corporate leaders have to ensure that the areas of growth are identified and acted upon.

This is where I think, sustainability comes in. Sustainability is the new growth market. Corporate leaders will have to ensure that the operational managers transform their product development and sales efforts in such a way that the company becomes more sustainable (in more ways than one). This will mean investing in new products, new processes, new staff and training of existing employees.

Anti-cyclical investment in sustainability

2. The need to invest is counter to the austerity Pavlov reaction shown by most managers when faced with a slow down of the economy. Favaoro and associates  call this, “Fight the Business Cycle”.

It is now the time to invest in growth by investing in sustainability. Production companies should actively look at bio-based resources, and service companies should look at reducing their carbon footprint and redesigning their product offering to include sustainability.

Wärtsilä and sustainability

The latter brings me to an advertisement at the back of the Elsevier (a Dutch weekly magazine).
Wärtsilä offers to reduce the ecological footprint of ships in operation. It really is a sign of the times if a main producer of ship engines offers clients not just a fuel efficient engine but offers its clients total solutions including ballast water treatment and oily water separators. Wärtsilä has taken the message to heart that to sell it has to focus on so the solutions customers want and nowadays that includes sustainability.

Felix Gruijters

Leadership on sustainability

Urgency breads leadership

A great Daily Chart from the Economist published on the 2nd of May shows the relationship between carbon dioxide and the temperature of the earth. Because the rise in temperature of the atmosphere is influenced by, for instance, the number of particles reflecting sun light  back up before it can heat the earth, the temperature of the oceans is a better guideline. In the chart below a steady rise can be seen in the heat content of the oceans. 

Leadership is not expected from governments

With the above in mind I read the results from the survey done by SustainAbility among 642 sustainability experts from 77 countries. 72% of them agreed that the green economy is the right theme for Rio+20. It is clear that the leaders in business see the importance of reducing their carbon footprint. From the survey it is also clear that change will have to come bottom-up. Consumers, producers of A-brands and investors are pushing sustainability, governments are staring into the headlights of an approaching car unable to react. The survey reflects this: only 13% of the respondents expect Rio+20 to contribute to sustainable development.

Leadership will be rewarded.

For those leaders seeking inspiration I refer to the McKinsey ‘s publication: Solar power: darkest before dawn. McKinsey draws a picture of a bright solar future, expecting between 400 – 600 GW of new installed solar power by 2020 (up form 65 GW now). McKinsey continues by giving advise to leaders of companies operating down stream from the PV panel producers:

1. Develop targeted customer offerings,

2. Minimize acquisition and installation costs,

3. Provide low cost financing.

This is sound advise but not easily implemented. It makes sense to state that those who will find a business model that answers the three requirements, will be favoured by the market.

Solar and Gas will lead the way

The rise of solar is also predicted in the publication by The Economist, The world in 2050, Megachange. Matt Ridley predicts that gas and solar will be the dominant and cheap sources of energy in 2050.

The influence of low gas prices can already be felt as it directly impacts the price of thermal coal, which according to the FT dropped on the 1st of May for the first time in 18 months below $ 100 per tonne. This might encourage the use of coal, which in turn increase carbon emissions. This can only be curbed by strong government regulation, taxing the carbon footprint of products, punishing those that were produced with energy generated by coal fired power plants.