Excerpt — A Culture of Sustainability

Perhaps you've already begun thinking differently about how your business intersects with society and are looking to find ways to improve your profitability while doing the right thing for your stakeholders. That's a great start. But becoming a sustainable enterprise isn't just a matter of placing an overlay on top of your conventional business thinking. It entails making a shift from an old way of thinking to a new one-a new mind-set that subtly or dramatically alters everything you see and do.

Here's an analogy. At a certain point in the last two decades, many managers learned to see fellow employees as their customers. One day, your colleague was bothering you for something he needed to do his job, not yours; the next, that same person's satisfaction with you was part of your performance evaluation-so meeting his needs became part of your job-and rightly so.

This change in viewpoint was a foundation of the quality movement, a transformation that vastly improved efficiencies within companies. In a similar way, the sustainability movement is now changing the way that managers relate to their environment and to those inside and outside the organization, with consequences that will be even more far reaching.

Sustainability seems to flourish in corporations that have four crucial traits: vision, honest self-awareness, strong leadership, and long-term thinking. Let's consider these traits in turn.

1. A Vision of What Sustainability Means to Your Organization

Having a vision of sustainability means seeing how the corporate world-and your industry and company in particular-works within the larger social and natural world. This is big-picture thinking: How is the world enriched or diminished by your products or services? What are your major impacts on society, and how does your overall business strategy reflect those impacts? How are stakeholders included in your decision making, and how are the costs and benefits of what you do shared among them? How do you take into account the needs of society and of future generations? Leaders of sustainable businesses will be able to answer questions like these.

Many companies find it useful to articulate a sustainability vision or mission, often summarized in a sentence or two. DuPont's is "creating shareholder and societal value, while reducing our footprint throughout the value chain"; PepsiCo's is to "continually improve all aspects of the world in which we operate-environmental, social, economic-creating a better tomorrow than today."

It's valuable to put your vision down on paper. A brief, well-crafted statement creates clarity and provides employees and stakeholders with a set of broadly stated principles, against which your efforts can be measured and that can be used to develop more specific guidelines, including your strategy, goals, and KPIs.

But a sustainability vision is more than catchy words. It requires you to see how to incorporate The Triple Bottom Line and its emphasis on environmental, social, and economic prosperity into every decision made throughout the organization, to think about how it takes hold at the operating level. Having a vision means constantly seeking answers to questions like these: What resources does your business take from the environment? How are those resources replenished? What are the biggest economic and social issues you face? How do you interact with the community? It may sound as if we are advocating that business people become part-time philosophers. In a way, we are. All of us are living in a time of transition. An older vision of business, in which financial performance is seen as the only way to evaluate your actions, is being exposed as inadequate to the demands of an interdependent world and, in the long run, self-defeating. A new vision, still in its formative stages, is taking hold, and no consensus has yet emerged on many of the important details.

Under these circumstances, upper- and mid-level managers who aspire to leadership roles in business must be part-time philosophers, even visionaries. Along with all their other roles (as strategists, managers, marketers, financiers, psychologists, product designers, and so on), executives today must take the time to think hard about the social, economic, political, environmental, and cultural transformation that business is undergoing and to decide how they and their companies will participate. If they don't, they will misunderstand or be blindsided by some of the most powerful trends and changes affecting their industry, their business, and their job. As a result, they may lose control of their company or find themselves left behind in new marketplaces, where the terms of competition are quite different than in the past.

2. Honest Self-Awareness

Anyone who has spent time working inside corporations with executives at various levels (as most consultants have) will confirm that leaders at many companies, especially managers on the way up, find it hard to be clear eyed about their own company. Often very insightful about the financial situation of the company, they can be unrealistic or out of touch when it comes to the company's nonfinancial performance. We find this especially true at consumer product companies with big brands. It's as if the relentlessly upbeat, happy-talk attitude that pervades their consumer advertising and marketing somehow seeps back into the corporation itself, making optimism mandatory and realism suspect.

An exaggerated concern about legal liability may also play a part: managers have possibly imbibed the notion that any acknowledgment, public or private, that they or their company may have made a mistake could somehow come back to haunt them. In fact, many companies refuse even to use the word "mistake" or "problem," at least in public. They edit out all such negatives and insist on calling problems "issues," "challenges," or even "opportunities" (as in, "The discovery that we've been paying bribes to officials in the Sudan provides us with an opportunity to improve our internal compliance programs.") "Improve" and "improvement" are also considered dangerous words; they seem to imply there is a problem that needs fixing. That's why corporate lawyers prefer the word "enhancement," as one can always enhance a program without implying there is a need to do so.

This blinkered, even upside-down attitude is potentially suicidal in today's world. Surveys show that employees are highly engaged and perceptive readers and analysts of their own company's reports. They know what's going on, and they know about the real problems facing their department or company. But if they see that the party line is "We don't have problems, just opportunities," they will get the message and won't disclose any problems, at least not to management. They may cover them up or talk to those for whom "problem" is not a dirty word, people like

Regulators, the media, or NGOs, who are not likely to have to have the company's interests foremost in mind.

Conversely, the ability to see yourself clearly and, even more important, to see yourself the way others see you is enormously empowering. Only by seeing reality and acknowledging your shortcomings will you stand a chance at real improvement. But honest self-appraisal is a skill that many managers and companies lack. They need to develop it sooner rather than later.

3. Strong Leadership

When driving a major change, such as the current move toward sustainability, strong business leadership begins with clarity of message. Jack Welch, the longtime CEO of GE, became a uniquely effective business leader because of his understanding of the vital importance of a clear message, expressed in simple terms, disseminated throughout the organization, and hammered home repeatedly. Thanks to Welch's insistence on the clear message, concepts like Six Sigma and "Be number one or number two in the market, or get out" became widely known (and practiced) not just throughout GE, with its six major businesses, dozens of business units, and 285,000 employees STET. And Welch's proudest moments were times when front-line GE workers, from secretaries to factory hands, were able to explain in a few sentences the latest corporate strategy-thanks to frequent missives, speeches, exhortations, and occasional explosions from "Neutron Jack."

Today's smartest businesses are applying the same lesson to the concepts behind sustainability. DuPont, for example, uses the admirably short and simple slogan "The Goal Is Zero" to summarize its environmental goals. Nor do DuPont's executives restrict their sustainability message to the top one, two, or three levels of corporate management. Instead, they follow the concept of "felt leadership," which states that "it is not enough for a policy to be written and posted on the walls; everybody in the organization must feel it. This means that it is considered in decisions, it is referred to at management reviews, and tough decisions are made to support the vision." As Travis Engen, CEO of Alcan, says, "I know a message is taking hold when they are arguing about it at lunch."

Along with a clear message, you need a sense of commitment from the top of the organization if your sustainability efforts are to bear fruit.

It's hard to overstate the psychological and cultural impact that can be achieved when the top leaders of a company get personally invested in sustainability. When PepsiCo decided to launch a sustainability initiative, it could have begun in any number of ways-via a memo, emails, or a company newsletter, or simply by collecting a few names of people "who ought to be involved" and informing them that they'd been chosen to initiate and coordinate the effort. But PepsiCo's CEO, Steve Reinemund, wanted to underscore his personal commitment to sustainability, so he made it a key topic at his annual three-day leadership retreat held in the Colorado Rockies.

Reinemund first introduced William McDonough, a highly charismatic visionary on the subject, to address the leaders. McDonough spoke with clarity and passion, emphasizing the business opportunities in sustainability and the fact that PepsiCo could be both more sustainable and more profitable.

At the end of McDonough's presentation, Reinemund returned to the podium. He stressed both his personal commitment to sustainability and the pressing business needs surrounding the issue. Then he called for volunteers to create a sustainability task force to develop a plan for PepsiCo and get it implemented.

Needless to say, Reinemund's approach got the leaders' attention. No fewer than twenty-five of the executives (including all five divisional CFOs, who lead strategy formulation within their businesses) asked to participate. They drove the project forward for a year, after which the task force was whittled down from this unwieldy number. By then, Reinemund's personal commitment, amplified by the way in which he presented it, had catalyzed a lasting change within the company.

Of course, commitment from the top means more than a one-time gesture, however emphatic. As he or she would with any major change at a large company, the CEO must devote regular time to the company's efforts, staying involved and informed, and keeping sustainability near the top of everybody's agenda. If the CEO's commitment is seen to wane, so will the energy behind the company's program. Then sustainability will get hung with the moniker that signals the death of any corporate initiative-the "issue du jour" — and gradually be ignored, then forgotten.

4. Long-Term Thinking

Many of the stories we've told in this book involve trade-offs between short-term costs and long-term benefits. The word sustainability implies long-term thinking, because it focuses on how your company can survive and thrive in the long term, and includes consideration of future generations. It's a time frame that most American businesses-unlike many of their counterparts in Asia and Europe-aren't used to, but one that is increasingly important to businesses today.

Many people blame the financial markets, but the development of the United States may help explain the prevalence of short-term thinking among American business leaders. As historian Frederick Jackson Turner famously wrote in his essay "The Significance of the Frontier in American History" (1893), America has been largely shaped by the idea of the frontier-the notion that there is always new land just over the next hilltop, pristine, limitless, waiting to be discovered and exploited. Even today, more than a century after the closing of the physical frontier and the linking of the continental United States by railroads and a strong national government, the idea of the frontier continues to affect our thinking. Americans still tend to assume that new horizons and new solutions are always just over the next hilltop. For President John F. Kennedy, outer space was "the new frontier." For many Americans of the last two generations, technology is the new frontier leading to new worlds, such as cyberspace, nanospace, and biogenetics.

Thanks to this frontier mentality, many Americans, particularly business leaders, are exceedingly comfortable with short-term thinking. Why worry about the future when America is a land of endless frontiers and limitless beginnings? (By contrast, the Japanese have almost the exact opposite perspective, being relatively short on land and poor in resources.) Combine this mentality with a businessperson's ability to solve difficult problems, often involving scarce resources of some type, and the American tendency to worship those who succeed against great odds, and you have a "Damn the torpedoes, full speed ahead!" view of the future.

This American optimism is very attractive, and because of the enormous influence of the United States on the world stage, it has had a profound impact on business thinking in Europe and Asia. But it's also dangerous. After all, the reality is that the frontier does have an end; open space is not limitless; natural resources are finite; and technology does not offer a perpetual escape hatch from any problem or challenge we may create for ourselves.

In recent years, millions of people in the United States and around the world have been gradually coming to recognize these truths-to accept the fact that we live in an age and on a planet of genuine limits, and that as world population nears seven billion there are some problems we simply can't solve fast enough. As the baby boomers age and come to realize that their children and grandchildren are facing financial, environmental, and social crises that the boomers themselves have helped create and for which there are no easy solutions, such as global warming, a sober sense of reality is gradually sinking in. And as this happens, the wisdom of longer-term thinking is becoming more apparent.

Much will have to change for long-term thinking to supplant quarter-by-quarter thinking in American business. U.S. business leaders need to learn from their counterparts in Asia and Europe the wisdom of planning for decades in the future, not just the next three months. Wall Street will need to learn to reward long-term growth, not just beating expectations for a quarter or a year. This will take time-but it will happen. We want to be living together here on planet Earth for a long time, and to do so, we will eventually have to change our way of looking at things.


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triple bottom line

THE TRIPLE BOTTOM LINE
by Andy Savitz

How Today's Best-Run Companies are Achieving Economic, Social, and Environmental Success — And How You Can Too

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