The Seven Pillars of Sustainability Leadership
September 19, 2016
The Conference Board recently released a terrific research report called The Seven Pillars of Sustainability Leadership. Written by Thomas Singer, it follows up on a 2015 survey where CEOs of companies around the world cited “sustainability” among the top five business challenges that they were facing. In the same survey, CEOs said that “ensuring sustainability is part of the corporate brand identity and culture of the organization” was the primary strategy for meeting this challenge.
The current report was the result of interviews with 84 senior executives who are members of The Conference Board Sustainability Councils and Chief Environmental, Health and Safety Officers Council. Executives were asked to identify the practices they considered to be the most indicative of leadership in corporate sustainability from a list of 15 practices presented by the research team.
For the purpose of this report, “sustainability” was defined as: “the pursuit of a business growth strategy that creates long-term shareholder value by seizing opportunities and managing risks related to the company’s environmental and social impacts. These impacts include elements of corporate citizenship, corporate governance, environmental stewardship, labor and workplace conditions, supply chain and procurement, community involvement and philanthropy.”
Here are the seven most cited practices that reveal leadership in corporate sustainability:
- The board of directors is actively engaged on sustainability issues. According to the report, global megatrends such as resource scarcity and climate change are becoming more relevant to board discussions about strategy, risk and performance. Boards that are engaged on sustainability issues are more likely to take a longer-term view, and are in a better position to foresee and prepare for potential risks and opportunities. (Curiously, when CEOs were asked in the aforementioned survey about their top strategies for meeting the sustainability challenge, they ranked “strengthen board oversight of sustainability issues” last.)
- The CEO and C-suite champion sustainability. Companies where the CEO and senior management take an active role in sustainability are more likely to experience success with their sustainability strategies. Sustainability steering committees offer a useful mechanism for developing and implementing a company’s sustainability strategy.
- Sustainability is embedded in strategic planning. With environmental risks such as climate change and water scarcity on the rise as recognized business risks, more and more companies are including a discussion of risks associated with climate change in their SEC filings (now more than 25 percent of S&P 500 companies do so compared with only five percent in 2013). Companies can begin this process by developing a priority list of sustainability risks and opportunities most material to their business, with input from internal and external stakeholders.
- Sustainability goals are strategic, ambitious, and long-term. Many sustainability goals have moved beyond operational efficiencies (doing “less bad”) to adding value. Setting corporate sustainability goals helps companies create accountability for improving sustainability performance and helps focus attention on the issues that matter most to the company and its stakeholders. The right goals can also help employees rally behind their company’s sustainability strategy and may help create a culture of innovation.
- Executive compensation is tied to sustainability performance. According to the researchers, “it’s no secret that incentive compensation of the C-suite drives focus, attention, resource allocation, and performance” so companies that are serious about sustainability are putting metrics in their incentive compensation practices for senior level executives. Linking incentive compensation to sustainability targets helps make sustainability a priority for the organization and can help managers focus on initiatives with long-term benefits that might have been ignored otherwise.
- Sustainability is part of the innovation process. The motivation for sustainability is shifting from achieving compliance, risk and operational efficiencies to a focus on innovation and growth opportunities. In fact, companies are increasingly pointing to revenue growth and business opportunities as the primary reasons for their sustainability efforts rather than cost savings.
- Sustainability is woven into company reporting and engagement. Companies with sustainability goals and priorities are increasingly comfortable with being transparent about their challenges as well as their opportunities, and they see increased value at reporting on sustainability at the same time as financial performance. Sustainability is also woven into communications with internal and external stakeholders, and is integrated into the company’s reporting processes.
Finally, corporate sustainability leaders recognize that the more their CEOs, senior leaders and board members are involved with sustainability issues:
- The more engaged they become;
- The more they begin to grasp the magnitude of the transformation that a low-carbon, resource-constrained world will offer;
- The more bold they become about the goals and investments they commit to; and
- The more excited they become about the upside opportunities for sustainability-led innovation and growth.
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