Last reviewed 11 September 2018

There is growing recognition in the corporate world that future business success will depend on managing environmental risks and integrating social values into corporate policies. Environmental management and social responsibility systems are available to support this but these can only work where there is strong leadership commitment and a willingness to change management culture. In this article, John Barwise reviews the principles of corporate sustainability and highlights how leadership and change management can work in practice.

Corporate sustainability is a relatively new concept that considers environmental stewardship and stakeholder values alongside business development opportunities and profit. Some of the world’s largest multinationals have already adopted this approach, and others, including supply chains, are going through the transition. And there are good reasons for this.

Addressing the challenges

Businesses face a growing number of challenges from climate change and a degrading environment. At a global level, the quality of water, air and land is deteriorating and the cost of energy and the availability of raw materials are becoming more volatile. At a local level, unpredictable weather patterns further increase the risks to business activities from storms, flooding and droughts.

As these impacts spread across society, other business challenges loom. Regulators require evidence that the business is operating legally, investors want to know where their money is being spent and the risks involved, while consumers, clients, and local communities seek assurances from companies that their activities, products and services are being managed responsibly and not contributing to the problem.

Businesses that rise to these challenges usually start by assessing how their activities and operations interact with the environment and seek ways to minimise potential impacts. The popularity of Environmental Management Systems (EMS), such as ISO 14001, shows there is growing recognition that implementing an EMS can improve business environmental performance, which in turn improves productivity and profit.

Beyond the tangible benefits of implementing an EMS, businesses are also seeking ways to build corporate ethics and social values into the culture of their organisation. At its core, corporate social responsibility (CSR) is about companies being accountable, not just to themselves and their investors, but to their employees, the local community in which they operate and wider society.

Businesses that engage in CSR do so in ways that enhance society and the environment, rather than contributing negatively to it. The UN’s Sustainable Development Goals (SDGs) provides tangible insights for companies on how they can create economic, social and environmental value. It includes goals that directly affect industry, including innovation and infrastructure, responsible consumption and production, and climate action, as well as those affecting health and wellbeing that can also impact on business activity.

Overall, corporate sustainability is about embracing social and environmental values without compromising business needs to develop and remain profitable. But to get to this endpoint requires leadership and management to initiate a cultural shift in the way businesses manage their activities that recognises its interactions with the environment and wider society.

Corporate sustainable leadership

The following leadership model, presented by the Cambridge Institute for Sustainability Leadership (CISL), questions traditional leadership models and highlights the drivers for effective leaders of the future.

Rewiring leadership: the future we want, the leadership we need

Businesses are failing to develop the leadership needed to respond to these challenges and opportunities, according to a report from University of Cambridge Institute for Sustainability Leadership, Rewiring Leadership: the Future We Want, the Leadership We Need. The report talks about the “end of business as usual” and the “changing face of leadership” and highlights the gaps in leadership that need to be filled.

Lindsay Hooper, Executive Director, CISL, argues that effective leaders for the future will be motivated by a purpose that aligns commercial success with delivering positive outcomes for society. “Many businesses recognise this and understand the need to respond to and, where possible, shape the changing context in which they operate. Yet at the same time companies are not systematically equipping their people to do so,” Hooper said.

CISL has developed a framework to equip business leaders and cultivate the necessary leadership to leverage these opportunities. The Cambridge Impact Leadership Model has been informed by nearly 30 years of delivering sustainability leadership programmes with more than 8000 business and Government leaders around the world.

The Cambridge Impact Leadership Model describes the leadership we need to deliver value for business, society and the environment. The model covers shaping businesses strategy, nurturing leadership practices and “unlearning” historic or legacy practices that are no longer fit for purpose. According to the model, leadership should be:

  • guided by purpose

  • built on thinking, values and practice to deliver on this purpose

  • continually reflecting and adapting and holding itself accountable to deliver the results required.

CISL leadership model develops leaders by:

  • helping companies to assess their leadership needs and develop a strategy to respond through its advisory services

  • building the capacity and commitment of individuals to lead through a rapidly changing global context, through both graduate and executive education

  • supporting organisations to prepare for the future by enabling them to understand and manage risks, harness opportunities for long-term value creation and shape an enabling context for sustainable business

  • catalysing collaboration between organisations to lead systemic change by co-creating solutions, taking leadership positions and making targeted interventions.

Hooper argues that corporate sustainability leadership goes beyond environmental management. “For businesses to be successful in reconciling sustainability with profitability, we will need to see a significant shift in the development of leadership capacity. That means new collaborations spanning HR, L&D, sustainability and executive teams, and with an investment in leadership capacity right up to Board level,” Hooper added.

CISL was one of the first providers of executive education to engage with businesses to help them to understand the alignment of sustainability and profitability as an imperative, requiring strategic thought and leadership action before applying technical solutions.

University of Cambridge Institute for Sustainability Leadership

Change management

Ray C Anderson, founder and CEO of carpet company Interface, was one of the early pioneers of corporate sustainability leadership. In his book, Confessions of a Radical Industrialist, Anderson, explains “Mount Sustainability” and the “seven faces” that must be climbed to become a sustainable business fit for purpose in the 21st century. He talks at length about the “buy-in” and commitment from senior managers and staff as “the most unexpected and gratifying … experience at Interface”.

In this study, Chartered Environmentalist and Professional Facilitator, Penny Walker, sets out the key elements for initiating corporate sustainability through change management, including the need for cultural change within an organisation.

Change Management for Sustainable Development

Change is an inevitable part of all successful organisations. Businesses that evolve and adapt to the continually changing external world lead their fields. Perversely, change is one of the hardest things for an organisation to embrace: if it ain’t broke, why fix it?

An organisation that embraces the principles of sustainability — meeting the needs of the present without undermining the ability of future generations to meet their needs — will change the way it does business.

This isn’t just about policies and procedures. Change management will go deep, beyond organisational structures into vision, mission, values and the hardest of all: culture.

The team assigned the role of helping the organisation become more sustainable will learn how their organisation changes and resists change.

The team will need to understand how the organisation impacts on society and the environment, and how things like climate change and shifting demographics are likely to mean society needs different things from the organisation in the near future.

Managing that change will involve:

  • building the organisation’s capacity to understand its sustainability impacts and opportunities and to navigate uncertainty

  • ensuring core strategic decisions take account of the evidence about extreme weather, shifting supply chains, population movements, availability of water and other key risks

  • supporting innovators to find new ways of delighting customers and service users, which have a better environmental and social impact.

And the team will also learn to build relationships with key internal and external stakeholders, spotting the ways in which more sustainable approaches can help the organisation solve its immediate problems, and reflecting on the impact their work is having.

When an organisation is sustainable, these things will have changed:

  • direct and indirect impacts: eg how it uses raw materials and energy, what it sells and the services it provides, the buildings it occupies, the waste it generates, ways it communicates

  • what the organisation is like: eg structures, roles, rewards and incentives, the things it measures and values, the things it says to its people, customers, and in policy debates

  • the people, the other players: eg suppliers, customers, regulators, other stakeholders, the skills, commitment, attitudes expected of the people who work in and for it

  • the external context, the system: eg the market, the cost of energy and materials, the laws, regulations and tax regime it operates within.

Change management can look, on the surface, like project management. Leaders decide what the destination is, plan how to get there, and set off. This is a mistake. It’s not a route march, it’s a process of engagement to define the future direction that people are eager to move towards. It’s not straightforward.

There will be experiments which don’t go anywhere and successes which no one saw coming. Multiple smaller initiatives will make the organisation ready for something bigger. As the team engage with colleagues, their different perspectives will lead to new ways of thinking. Parts of the organisation will respond to those sustainability issues that fit best with their culture and ambitions. Progress will ebb and flow. Opportunities will present themselves years earlier than expected. Sudden change in the outside world will mean that targets which were set no longer make sense.

The sustainability change maker needs to both understand their organisational context — where they are now — and to prepare to be surprised!

What might change? pp 108–109 Walker, 2017 Change Management for Sustainable Development, IEMA

Managing change effectively

Changing from a “business-as-usual” model to one that seeks to put people and planet on a par with profit, brings its own transitional challenges.

Businesses are generally used to transition, whether it is in some form of management buy-out or sale to a third party, or something more direct, such as changing company policies and management systems or developing new production lines.

In his Paper, the Transition Curve — Managing Change Effectively, Paul van Casteren, et al, argues that change in the business environment today has become a more rapidly fluctuating and powerful influence than at any time previously.

The Transition Curve — Managing Change Effectively

In the Paper, the Transition Curve seeks to monitor and explain the cultural and behavioural changes that staff and managers may experience during transition — this can apply to corporate sustainability or other changes in management policy or structure.

The seven stages of the transition curve include the following.

  1. Shock — implementing new management techniques, such initiatives can demand new and unanticipated behaviour from managers and staff.

  2. Denial — a sense that the shift to corporate sustainability will not be significantly difference from the old way of working.

  3. Awareness — limits of personal competence and frustration about how to manage the change process.

  4. Acceptance — involves the individual in “letting go” of previously held attitudes and recognising new skills and competences may be required to fit a new sustainability ethos.

  5. Testing — the stage in which organisations need to introduce new strategies and practice new methods of working to behaviours which have become comfortable.

  6. Search for meaning — understanding why certain aspects of individual behaviour have been effective, and why, on occasions, it has been ineffective.

  7. Integration — where individuals take ownership of new approaches to sustainability and new skills become an integral part of corporate sustainability.

Paul van Casteren, one of the founders and principal consultant of Potential Development, specialising in Coaching, Team Building and Organisational Culture Change

The transition to a new way of working that embraces environmental stewardship and stakeholder values within a corporate structure can generate both negative and positive influences on staff. Negative personal influences may involve fear of uncertainty or absence of support from senior managers, leading to a lack of self-confidence in the change process. On the positive side, with active support from senior managers, staff are more likely to engage proactively in a new corporate sustainability culture that recognises personal contributions and collective benefits for business, environment and society.

Final thoughts

The concept of sustainability is gaining traction across a wide range of industry sectors and supply chains. But perhaps the largest cohort driving the corporate sustainability agenda are the younger generations starting out on their careers.

According to a Cone Communications Survey over 75% of millennials consider a company’s social and environmental commitments when deciding where to work and nearly two-thirds (64%) won’t take a job if a potential employer doesn’t have strong CSR practices.

Evidence such as this suggests that those companies that adopt corporate sustainability as an integral part of their business activities are more likely to attract the best talent to take their business forward in the future.