Leadership & Vision

Key Challenge

Integrating sustainable development into the way an organization does business requires change and leadership from senior management.

Background

Leadership by organizations and within organizations changes the way they do business, and can have a social impact on the way people live their lives.  Leadership and vision are arguably the most important catalysts of change, and it is a long-held belief that leadership distinguishes successful organizations from their less successful counterparts. This certainly applies to delivering a sustainable business model.

Although sustainability often forms part of an organization's mission or strategy, leadership helps to ensure that an organization looks at its business through a new lens.  The sustainability lens reveals the world through the eyes of its stakeholders, and helps an organization to understand the many ways, good and bad, that operating activities affect and are affected by society, the economy, and the environment.

Leadership, however, is an elusive and complex concept, especially in its role in facilitating sustainable development.  It is elusive because the success and appropriateness of leadership depends on context.  There is no right approach.  Its complexity arises from its different facets.  On the one hand, leadership entails the use by senior managers (CEOs, chairpersons and other directors) of their formal position, business knowledge and experience, and personal characteristics and charisma to facilitate change.  Leadership actions such as public and internal statements, presentations, and interviews can improve an organization's performance incrementally or, on the other hand, change the rules of the game.  But leadership is also concerned with the difference other employees can make in their everyday actions, and effective leadership can occur at all levels of an organization.  Lack of leadership on sustainability issues has been cited (see Caption 3) as problem for creating change in organizations.

Organizations can also consider the scope and objective of their leadership.  Organizations might seek to become socially responsible, and in the process adhere to society's current values, but it might choose to be progressive and shape society's values.  There is room for both.  Large multinational organizations, as microcosms of society, can choose a progressive path that shapes social values in a way that raises standards above current regulatory and legal requirements.  They are probably in a better position to do so than governments.  To achieve this requires both (a) clear messages from organizational leaders in leadership statements, presentations, and other interactions with the public and employees, and (b) a vision and mission from which organizational goals and targets can flow and, ultimately, be translated into an inherently sustainable business model.

Organizational leadership is highlighted by the recent declaration (see Caption 4) of some of the world's largest companies, including Sony, Nokia, Nike, and Hewlett Packard that reflect a growing trend by global corporations who are waging war on climate change by taking steps to cut greenhouse gas emissions.  These companies recognize that some governments are failing to show sufficient leadership in the fight against global warming, and that it's in their power to influence change.

Key Considerations

Integration of sustainability requires ownership at the top: Integration of sustainable development into the way an organization manages itself requires ownership at the governing body level (the board). Ideally, the Chief Executive Officer champions (a) the integration of sustainability into strategic discussions and subsequent follow-up, and (b) specific sustainability initiatives. This helps to ensure that sustainable development is approached more from a performance-based rather than (only) a compliance-based perspective and properly treated as an important strategic issue that forms an integral part of the board's efforts to secure long-term value generation for stakeholders (also see IFAC's International Good Practice Guidance on Evaluating and Improving Governance in Organizations).

Organizations embracing sustainable development at a senior management level and integrating it in their strategic planning typically move beyond delivering short-term results to please impatient investors and stakeholders. Such organizations tend to have more success in employing their long-term strategy in a wider context that attaches importance to social and environmental impacts.

Values guide behaviors and decisions: Effective leadership complements a values-based program and code of conduct to promote (a) an organization's underlying values, (b) commitment to employees, (c) standards for doing business, and (d) its relationship with wider society. Organizational codes of conduct and values are extremely important, and many companies have demonstrated leadership and positive change through developing and implementing these codes. Values are what an organization stands for and the qualities it wishes to demonstrate. Setting out and embedding values is critical in helping employees deal with the complexity of decisions an organization faces. Only a values-based code of conduct/ethics (as advocated in the PAIB Committee's International Good Practice Guidance on Defining and Developing an Effective Code of Conduct) can help organizations that manage supply chains to expand globally. The values-based approach, with strong and visible leadership, recognizes that taking a sustainable path can require tough decisions where it is difficult to balance stakeholder expectations, and the path to long-term success is not necessarily clear. For example, enforcing standards of behavior for suppliers in remote sites cannot be achieved effectively with a written code of ethics that is simply passed on to local management (see Engagement of Suppliers).

Policies support the integration of sustainability initiatives: Both leadership and envisioning complement organizational sustainability policies as a mechanism for embedding sustainability values and principles, and integrating these at a strategic and operational level. For example, an environmental policy could detail (a) the organization's compliance with laws and regulation, (b) its own view on the importance of environmental performance to its business operations, and (c) its environmental impacts and initiatives to reduce it, such as investing in renewable energy, modifying product design, or improving manufacture. An example of an environmental policy framework can be found at Goldman Sachs. Most large organizations, in Europe in particular, have adopted policies to support sustainability initiatives, which typically cover social, health, safety, and environmental issues.

An environmental or broader policy on sustainable development is a prerequisite for organizations taking sustainable development seriously.  Most importantly, it is a signal to internal and external stakeholders, but it also frames an organization's intentions and activities.  An environmental policy can reference charters, standards, and regulations against which it might benchmark its performance.  Multinational organizations should also consider benchmarking all operations against the operational expectations in those jurisdictions with the most stringent requirements.