The authors of the Kellogg study observe that – like with all key changes – it was easier to embed sustainability thinking in corporations through open employee interaction.
Like all other policies, a shift to thinking in terms of the triple bottom line of economic, environmental and societal impact and performance can’t be mandated from above.
No surprise. It takes an enlightened, self-aware and empowered working atmosphere to foster stakeholder orientation.
In my experience, each leadership team forming around a new CEO feels a need to define the role of the company. This often embark on this process with a simplified view of the stakeholder universe – employees, customers, shareholders, business partners and society at large.
This is a good moment for the CCO. We should help the CEO delineate, codify, implement and measure how the company carries out its societal role – because this will lead to a better core narrative and more constructive connectivity, and thus add value to the brand.
Ask some questions. Who are our stakeholders? Do we see the world from their perspective? Do they recognize our contributions and see us part of a positive cause? If not, why not? Something wrong with our performance, with our behavior or with our communications? The answers may hurt. We may find it hard to change reality, but we will find it even harder to change a poor reputation. But knowledge is power.
Self-examination can even lead to strategic rebranding – think of General Electric’s Imagination at Work, built around a new way of seeing the company’s place in the world, its contributions and its reason for being.
How open are the CEOs we advise to discussions about how a sustainability and CSR focus can trigger better business performance? How adept are we PR folk at this sort of challenge? Who else in the company can help us engender a discussion? That’s the team I’d look for.
Sadly, we to often we see companies closing in and shutting down at the slightest sign of performance trouble. A company under pressure – and those lacking new strategic ideas – tend to lose the focus on the core purpose and instead try to manage the perception of their results. Further performance slips usually follow.
So, my core thesis is this:
Sustainability, i.e. seeing company performance along the three dimensions of economic, environmental and societal impact, is a way to build and drive a better business.
But even purely from a risk perspective, you can sell sustainability internally because it adds pragmatism and helpful transparency.
How, you may ask? Can performance be measured along the triple bottom line? The answer is yes.
For a good set of tools to assess how a company performs as a societal entity, try GRI. The Global Reporting Initiative is a multi-stakeholder initiative which has produced solid, proven indicators to record and report sustainability and CSR performance.
I have worked with GRI as a reporting framework in both ABB and Shell, for 10 years or so. GRI works. It leads to better discussions internally, and it is the backbone of solid external reporting.
Unfortunately, most corporations seem to need to be slapped around by public opinion before they understand and connect with their wider stakeholder universe. Perhaps studies like the Kellogg research can bring in such learning in gentler ways.
We owe it to the CEO and the leadership team to insist that business can and should become one player in addressing today’s challenges, and that increasingly, our customers and investors want us to frame our performance in such terms, too. If for nothing else, so to reduce risk.
Let me share one example from a sector I know well, the oil and gas sector. It learned the hard way that following Milton Friedman’s mantra (the business of business is business) leads ultimately to value erosion. Look at this:
A study by Goldman Sachs of 190 projects operated by the international oil majors showed that the time for new projects to come on stream has nearly doubled in the past decade, causing significant cost inflation.
A separate follow-up analysis showed that community challenges and resistance to company operations, typically on environmental and human rights grounds, were one of the biggest factors. We called that stuff non-technical risk (NTR). One company was estimated to have lost $6.5 billion in value over two years for such reasons, amounting to a double-digit fraction of its annual profits.
And anything that is not geology or engineering is NTR: politics, social norms, movements against possibly polluting or environmentally invasive ways of working – anything that causes delays in a project.
To spot and address well such non-technical risks is sustainability management at the highest level. It can only happen if the people in the company drive it.
And if is doesn’t happen, as we experienced, society will inflict punishment where it hurts – on the economic bottom line.
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