2012 introduced several significant developments in sustainability, most notably around the issues of climate change, risk management, and supply chain ethics.
June’s Rio+20 United Nations Conference for Sustainable Development dominated the year’s discussion, reinforcing the need for corporations to play a larger role in attaining sustainable development goals. PricewaterhouseCoopers’ Low Carbon Economy Index publication1 supports this sentiment, showing only minor improvements in global carbon intensity reduction. As climate change regulation escalates in response to these numbers, we can expect to see more investors and consumers paying attention to corporate sustainable development strategies.
Companies anticipate these changes. More than two-thirds of Fortune 500 companies now issue sustainability reports, with many also investing in sophisticated methods of tracking and reporting emission data. The Carbon Disclosure Project2 reports that in 2012 alone top firms integrating climate change into their business strategies reduced their emissions by nearly 14%.
2012 was filled with corporate behavior scandals. Companies like Barclays and Walmart found themselves in the spotlight amid global concern over lack of corporate and supply chain ethics. Natural disasters raised further questions about the ability of companies to adapt and become resilient to social and environmental challenges. Greater investment in supply chain management, stakeholder engagement and financial-environmental reporting will develop as business leaders seek to address these reputation and environmental risks.
As sustainability becomes more mainstream one trend also continues to hold promise: companies will continue to expand their investments in sustainability, and intensify their focus on pressing issues like energy efficiency, natural resource management, and health & safety. A study by the Massachusetts Institute of Technology shows that greater numbers of companies view corporate environmental and social responsibility as a profit boost.3 2013 will see increased corporate spending on sustainability issues like clean technology, sustainability reporting assurance, and corporate sustainability programs. In 2012 this was already made evident with evermore additions of chief sustainability officers to corporate boards.
Sustainability is Transforming the DNA of Leadership
Sustainability is about longevity, but it is also about transformation. “How do we respond to challenges and evolve for the better,” is always a question central to any leadership strategy. But being able to effectively communicate that question, connect it to a larger movement, inspire higher performance, find innovative solutions and influence traditional thinking are all characteristics that pertain to only a certain kind of leader. Given the recent flurry of climate change scares, there is no doubt that it is this concept of a “transformative leader” that will be leading the year’s discussion.
What is transformative leadership? Simply put, transformative leaders focus on their followers: they motivate followers to achieve higher levels of performance, listen and respond to their needs, challenge them to be innovative and creative, and in the process help them to develop their own leadership potential.
A recent report by The Climate Group4 spells out five traits that need to be embraced by business and government in order to create transformative leaders and achieve long-lasting, low-carbon results. The first step? Embrace change.
Many political and business leaders already acknowledge change, but only in recent years have we seen these leaders begin to embrace change as an instrumental part of longevity. For instance, in his second Inaugural Address, US President Obama announced a renewed commitment to clean energy and greenhouse gas reduction. In doing so he warned America of the need to change with changing times: “The path towards sustainable energy sources will be long and sometimes difficult. But America cannot resist this transition; we must lead it.” World Bank President Kim Jong Kim has also recently promised to make tackling climate change a top priority during his term. These leaders are beginning to embrace carbon reduction – not as a goal, but as a long-term and integral strategy for profitability, economic growth, and security. Their brute regulation is not only imminent, but also reflective of a new style of leadership: one that is strategic, determined, and receptive to the possibilities of change.
With decisive leadership also comes disruptive leadership. Transformative leaders create controversial strategies that challenge the way sectors and state interact. According to Senate climate guru Barbara Boxer, we can expect to see this approach in upcoming U.S. policy, whether in the form of a revenue-generating carbon tax or re-energized EPA regulatory schemes aiming to drive businesses to compete in energy markets and pave the path for clean energy.
We’ll also witness this as an increasingly common business strategy for success. According to The Carbon Disclosure Project, more than two-thirds of business already put climate change at the heart of their business strategies. Most of these companies are reporting their emissions at the company level. However, many more are challenging the status quo by learning how to extend emission reporting from the confines of their own operations to the wider effects of their products – re-defining the scope of reporting to include categories such as product use phase, end of life phase, and carbon abatement of products and services.
The Business Case
The business case is evident in the following graph where organizations that join the Carbon Disclosure Leadership Index (CDLI) have much better financial performance overtime that all the others in the Global 500 Index. The CDLI5 includes Siemens, Coca-Cola, Microsoft and many other industry leaders.
As a result of the expansion of businesses acting as Good Corporate Citizens, in other words embracing Sustainability principles, an array of codes, standards, guidelines and frameworks beyond CDP are available to guide companies in integrating corporate responsibility into their business strategies and management processes. Needless to say, their purpose is to drive the performance of companies in line with the goals of sustainable development. The largest of such frameworks (in regards to company participation) is the UN Global Compact, which currently has 10,000 participants, including over 7,000 businesses in 145 countries.6 Thus, Business leaders no longer wonder whether to use such tools; on the contrarily, they ponder as to which combination of tools will bring best performance. In 2012 this was made evident with evermore additions of chief sustainability officers to corporate boards, with Unilever being among many to expand its sustainability teams, and a bright example.
Through a slightly more pessimistic lens, environmental disasters, like Hurricane Sandy coupled with governance lessons learned from 2012, remind us that there are many areas of Leadership we can and should expect businesses to embrace dynamically within the future. Hopefully as a lesson, we will see Sustainability directives become more coordinated across departments, causing a big shift in corporate structure and thinking. Corporate heads will look to leaders that can demonstrate the drive and flexibility needed to collaborate across business units and influence decision makers. Perhaps the latest ‘G4’ revision of the reporting guidelines by the GRI is another way of moving leadership deeper into Sustainability efforts!
At the Centre for Sustainability & Excellence, we observe these progressing trends with a growing number of professionals attending our global Sustainability and Carbon Strategy Practitioner training programs in all major cities including New York, Chicago, San Francisco, Atlanta, Toronto, Tokyo, Dubai and Brussels. Our registrants hail from forward-thinking companies like United Airlines, Walmart, Unilever and ABM. Their backgrounds are diverse – comprised of Sustainability and CSR Officers, Communications and Marketing Directors, Investor Relations and even Media Relations departments. What unites these individuals is a growing demand to learn: how to be radical, how to be transformative and how to create impactful, enduring value. Our upcoming trainings held in Chicago on March 7 & 8th (Certified Carbon Strategy Practitioner – IEMA Approved) and London on April 25 & 26th (Certified Sustainability CSR Practitioner Training – IEMA Approved) are designed in response to this maturing mentality. The trainings include all scopes of GHG emission reporting, and incorporate hot topics such as water footprint, Life Cycle Analysis, and carbon reduction via green building as well as Sustainability reporting, stakeholder engagement and identification, CSR Reporting and implementation respectively. As many more begin to follow these trends and pursue such knowledge, simple policies and reporting will no longer be enough. Investors and stakeholders alike will be looking for radical strategies that aim to create long-lasting impact – those professionals without the right amount of know-how might as well fold their cards to this new era of transformative leadership.
About the Author
Nikos Avlonas, CSE President, was recognized by Trust Across America as one of the Top 100 Thought Leaders In Trustworthy Business Behavior in 2010, among many other corporate leaders. The Centre for Sustainability and Excellence (CSE) is a global Sustainability (CSR) strategic advisory and training organization providing in-house and open trainings that meet the needs and requirements of every industry and the business activities of every organization. As an Approved Course and Training Organization under the Institute of Environmental Management and Assessment (IEMA), and a GRI Certified Training Provider, CSE offers intensive professional learning opportunities to executives and senior level managers on Corporate Social Responsibility Strategies, Carbon Footprint, CR legislation, Sustainability Reporting and Climate Change Leadership, having trained over 5,000 professionals from five continents.
CSEs international certified training: Global Certified Sustainability (CSR) Practitioner; Certified Carbon Strategy Practitioner; and GRI Certified Training on Reporting; takes place in New York, Chicago, San Francisco, Brussels, Athens, Dubai, Abu Dhabi, Oman and Tokyo. For more info about the next training programs visit www.cse-net.org
References
1. PwC (2012), PwC Low Carbon Economy Index 2012: Too late for two degrees? Assessed on 10/2/13, available at: http://www.pwc.com/gx/en/sustainability/publications/low-carbon-economy-index/index.jhtml
2. Carbon Disclosure Project (2013), Business resilience in an uncertain, resource-constrained world: CDP Global 500 Climate Change Report 2012. Assessed on 14/2/13, available at: https://www.cdproject.net/en-US/Results/Pages/reports.aspx
3. Arthur, D. et al. (2011), Sustainability: The ‘Embracers’ Seize Advantage. Massachusetts Institute of Technology. 52, (3), pp 1-27.
4. The Climate Group (2012), Infographic – The DNA of low carbon leadership: five traits to embrace now. Assessed on 10/2/13, available at: http://www.theclimategroup.org/what-we-do/news-and-blogs/infographic-the-dna-of-low-carbon-leadership-five-traits-to-embrace-now/
5. Carbon Disclosure Project (2013), CDP 2012 disclosure scores., assessed on 10/2/13, available at: https://www.cdproject.net/en-US/Results/Pages/CDP-2012-disclosure-scores.aspx
6. Crane & Matten (2013), Should the UN Global Compact have sharper teeth? Assessed on 14/2/13, available at: http://craneandmatten.blogspot.gr/2013/01/should-un-global-compact-have-sharper.html
