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Tolerating Failure: A Key to Creating Sustainable Business

January 17, 2018 • STRATEGY & MANAGEMENT, People Management, Team Managment

By CB Bhattacharya, Ernesto Ciorra and Joanna Radeke

Best-in-class companies galvanise their workforces to serve a larger purpose – creating a better world. They empower employees by providing leadership support and a sense of psychological safety. We illustrate how it can be done based on the example of Enel “My Best Failure” program for celebrating failure and encouraging innovation.

 

The idea of creating sustainable business is not new to business executives. They all should be creating shared value (Kramer and Porter 2011),1 which in simpler terms means making money and doing good, and they all should be writing the new story of business (Freeman 2017)2 by transforming their companies to become responsible citizens and changing the world for better.

But where are the real life examples of such transformations? With issues such as global warming, water scarcity and rickety supply chains representing dire threats to human societies, the absence of corporate action to date is startling. Scientists have calculated that humans must decrease carbon dioxide output by around 1.4 percent each year to prevent catastrophic warming. Yet the world’s 500 largest companies increased their emissions by 1 percent between 2010 and 2015.3 Water scarcity is getting worse, contributing to famine, military conflicts as well billions of dollars in losses for companies. Yet a 2016 survey of hundreds of companies found that they are moving slowly, with performance not “improving markedly” year over year.4 Only 15 percent of companies had a “comprehensive water policy,” and only two-thirds were even measuring their water usage.5

Over the past five years, we have visited dozens of large, publicly listed firms and spoken with hundreds of employees, middle managers and senior leaders. We have also ventured outside of corporate headquarters to the front lines, visiting factories, mines, retail stores and other facilities across the globe. In addition, we have engaged in-depth with at least thirty large, multi-national corporations as part of the Sustainable Business Roundtable – a unique, peer-to-peer learning network one of us founded (CB Bhattacharya), one of us manages (Joanna Radeke), and one of us is part of (Ernesto Ciorra).

Our extensive research has revealed that best-in-class companies galvanise their workforces around the future and the common good by making it worthwhile for individuals, both from a financial or career standpoint and from the standpoint of their identities as professionals (Bhattacharya and Polman 2017).6 They try to create workplaces in which employees do not have to check their humanitarian or environmental commitments at the door, and where sustainability and profitability objectives go hand in hand (Polman and Bhattacharya 2016).7 Employees in such companies are engaged to serve a larger purpose – creating a better world.

The cases of enlightened companies show that this engagement around the common good often happens at unexpected moments and in unexpected places. When one of us (Bhattacharya) interviewed the Enel CEO in June 2016, and he told us about his personal epiphany at a dessert, we knew the company is one to watch out for. When one of us (Bhattacharya) found himself at a big ceremony in the Enel headquarters in Rome, where employees were receiving awards from the same CEO for their business failures, we knew we are onto a new story of business.



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About the Authors

CB Bhattacharya is the H.J. Zoffer Chair in Sustainability and Ethics at the Katz Graduate School of Business, University of Pittsburgh. He founded and directs the Centre for Sustainable Business at ESMT Berlin, Germany. He is a world-renowned expert in business strategy innovation aimed at increasing business and social value.

Ernesto Ciorra joined Enel in October 2014 as a Chief Innovability Officer. He graduated from Bocconi University. He is also a founder of Ars et Inventio, a consulting firm focused on innovation and creativity. He has supported many companies with designing and launching innovative products and services that have become popular worldwide.

Joanna Radeke is a sustainability/ corporate responsibility researcher. She manages the Centre for Sustainable Business (CSB) at ESMT Berlin, Germany and its network of the Sustainable Business Roundtable (SBRT) member companies. She works with companies to help them increase value from their sustainability investments.

 

References

1. Porter, Michael E. and Kramer, Mark R. (2011). Creating Shared Value. Harvard Business Review January-February 2011.
2. Freeman, R. Edward. (2017). The New Story of Business: Towards a More Responsible Capitalism. Business and Society Review 122 (3): 449–465.
3. Moorhead, John and Nixon, Tom. (2016). Global 500 Greenhouse Gases Performance 2010-2015. Thomson Reuters June 2016.
4. CDP (2016). Thirsty business: Why water is vital to climate action. CDP 2016 Annual Report of Corporate Water Disclosure.
5. Ibid.
6. Bhattacharya, CB and Polman, Paul. (2017). Sustainability Lessons from the Front Lines. Sloan Management Review 58 (2): 71–78.
7. Polman, Paul and Bhattacharya, CB. (2016). Engaging Employees to Create a Sustainable Business. Stanford Social Innovation Review 14 (4): 34–39.
8. Kahn, William A. (1990). Psychological Conditions of Personal Engagement and Disengagement at Work. Academy of Management Journal 33 (4): 692-724.
9. Farson, Richard and Keyes, Ralph (2002). The Failure-Tolerant Leader. Harvard Business Review August 2002.

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