More and more, companies are finding ways to improve their social and environmental impact while increasing their business performance.
Today, 90% of managers believe a sustainability strategy is “essential to remaining competitive,” and there is now a robust business case for sustainability. In one meta-analysis of over 200 sources, 88% of research reviewed shows a correlation between strong sustainability practices and better operational performance, and 80% shows a link to higher stock prices.
On the other hand, companies rarely live up to their sustainable aspirations.
While 60% of companies adopt a sustainability strategy, just 25% develop a business case for sustainability, and remarkably only 2% of organizations achieve or exceed targets. Senior leadership support may be the most crucial factor in success. A recent Stanford Social Innovation Review article points out:
“CEOs create the vital liftoff energy for sustainability efforts and keep momentum throughout the journey….A CEO may be the only one capable of pushing through tough choices that break with long-standing practices.”
As an executive coach, I wanted to understand what leadership practices create success in sustainable companies. To that end, I conducted 20 interviews with founders of companies known for being sustainability-focused and with thought leaders in related areas. This included the founders of Birkenstock USA, Seventh Generation, Stonyfield Farm and Numi Tea; and thought leaders like Bart Houlihan, co-founder of B Lab.
Through these interviews, and my experience coaching hundreds of leaders, four key themes emerged. While I focused on companies, I believe the findings are useful for nonprofits and foundations as well. The themes are:
- Create a clear, inspiring, shared vision that explicitly articulates social/environmental impact
- Develop stakeholder empathy and create value broadly across stakeholders
- Ensure alignment inside and outside the company
- Build an empowered team
Create a clear, inspiring, shared vision that explicitly articulates social/ environmental impact
Many leaders I interviewed underscored the importance of vision as the guiding light for their enterprise. Paul Saginaw of Zingerman’s Community of Businesses described vision this way:
“I think the essential act of leadership is to provide this attractive, achievable, inclusive, life-affirming vision of the future…It is the what and the why of the organization. This is what we’re going to be, this is where we’re going and this is why we do it.”
Over the past 30 years, Paul, his business partner Ari Weinzweig and their team have grown their company from one small delicatessen into a group of 10 local sustainable businesses that employ 750 people. Though financially successful, what’s most inspiring about Zingerman’s is the beauty and power of the company’s vision.
Growth for its own sake was never the focus. Instead, from the beginning, Zingerman’s was infused with the ideal of building something unique and rooted in the community, something that would enable employees to flourish. They grew “deep” rather than growing “wide,” empowering team members to start a bakery, a creamery and other local businesses under the same umbrella company.
Zingerman’s vision statement has an overt focus on social and environmental impact, and they’ve applied their model of sustainability to all aspects of their work. And the business, the community, the customers, the staff, the suppliers and the environment are better off now than when Zingerman’s embarked on this vision more than a decade ago.
Values, a component of vision, are guiding principles that inform everything a company does. They are less about having a written statement and more about uncovering the unchanging principles that live inside leaders and employees. Jim Collins and Jerry Porras point out that values are not created, but discovered. And most companies only have three to five values that are truly core:
“After you’ve drafted a preliminary list of the core values, ask about each one, if the circumstances changed and penalized us for holding this core value, would we still keep it? If you can’t honestly answer yes, then the value is not core and should be dropped from consideration.”
Values help leaders stay true to themselves. They provide long-term guidance for decision-making, and they are crucial to keeping sustainable companies honest, especially when faced with difficult trade-offs.
One way organizations go wrong is to think that a vision statement is synonymous with an inspiring, shared vision. They jump too quickly to wordsmithing before the underlying vision itself is clear. This often results in laboriously hammering out a vision statement people agree to, but that doesn’t embody a shared picture of an exciting, inspiring future.
A great vision can be described using a variety of different words. Leaders should strive for both—an inspiring vision for the future, and language that captures it eloquently and clearly.
Develop stakeholder empathy and create value broadly across stakeholders
Sustainable leaders develop a deep understanding of a wide range of stakeholders. Of course this includes customers, employees and investors; but it also includes supply chains, competitors, government and nonprofit agencies, community members and the environment. It can include employees’ families or the customers of your customers. A deeper understanding of stakeholder interests enables a company to add more value, and do more good.
Jeffrey Hollender, co-founder and Chairman of Seventh Generation, emphasized:
“Being a good social entrepreneur requires the ability to think from a system perspective and to think about the multitude of stakeholders and the whole impact you have, particularly the unintended consequences.”
To build empathy, there’s no substitute for spending time with stakeholders, asking open questions, listening deeply and doing research. There’s also strategic value to deeper stakeholder relationships: they better position a company to weather social, environmental and other changes.
Once strong stakeholder empathy is in place, sustainable leaders work hard to create value across stakeholder groups. This means being very thoughtful to avoid tradeoffs that benefit one group while harming another, like decisions that help investors but harm the supply chain. As far as possible, sustainable companies work to reduce harm and create value across the board. This requires innovative, creative strategies, and occasionally means turning away opportunities for the sake of the company’s whole ecosystem.
Ensure alignment inside and outside the company
It’s important that the culture inside a company reflects its outward-facing vision for a better world. When I spoke with Amy Cappellanti-Wolf, she was head of HR at Silver Springs Networks, a smart-grid company. She said employees expect that alignment:
“When you hire folks who are very mission-oriented, their bar is super high about making certain that you’re not only green on the outside but you’re green on the inside. As a result of that, our employees have a more critical view of some things that other employees might let pass, because they believe so much in the vision of this company.”
As a simple example, Silver Springs employees felt strongly that the company should compost kitchen waste, something that might have been less important at another company. When there’s a disconnect between a company’s vision and its culture, it can hurt morale and productivity. In a sustainable company, each internal policy and practice, from composting to compensation, should embody a commitment to people and planet.
As a sustainable company grows, one temptation is to recruit experienced senior leaders who don’t align with the vision. It’s easy to understand why this could be problematic: many seasoned senior executives “grew up” in corporations that aren’t visionary about sustainability. Some adapt well to a more sustainable company, some don’t. Jeffrey Hollender discussed the challenges of hiring senior executives who were not mission-aligned. He found that people were “seriously damaged and poorly trained” by their experience working in companies that rewarded the opposite kind of behavior that Seventh Generation values. Alignment on values requires a disciplined approach to hiring—saying “no” to highly skilled but unaligned candidates for executive or board positions, for example.
Other stakeholders also need to be aligned with the vision. Margot Fraser, founder of Birkenstock USA, provided an example:
“One of the young sons in Germany started toying with the idea of making some of the sandals in China. But that never happened. They are still made in Germany and that means paying people a decent salary, and that’s where the price comes in. They are not inexpensive. But they last a long time, and customers found that in the long run they were less expensive than some cheap sandals that fell apart right away.”
In this case, customers were aligned with the company’s values. Leaders should think more broadly about their stakeholders, know them better and choose them more carefully. The more all your stakeholders resonate with your vision, the stronger your position because you have more shared interests.
Build an empowered team
To be truly supportive of employees, sustainable leaders have clear expectations with goals, metrics and strong accountability. It can mean pushing people. Paul Saginaw put it this way:
“Part of servant leadership is holding people accountable. It’s disrespectful if I don’t hold you accountable within the organization. The implied message is, you’re just kind of average, and you’re stupid, and you won’t be able to do this.”
Creating a culture of feedback is key to holding people accountable and helping them grow. In my coaching work I see a tremendous need for more skill and courage in giving feedback. It’s startling when an otherwise outstanding, effective executive is unwilling or unable to give timely, granular feedback.
Another way to maintain high standards is to invest in employee development. When Jeffrey Hollender found that external hires didn’t align with Seventh Generation’s vision, he realized that employee development was a missing piece. Employees also appreciate when companies foster their growth.
Excellence in communication is also crucial, and I would draw special attention to the importance of listening. There simply aren’t enough good listeners in the world, and there are “listening deserts” in many organizations. People are desperate to be heard. Deep listening enables leaders to understand the needs and struggles of their teams. It provides strategic intelligence, boosts employee engagement and fosters a culture of warmth and human connection well-suited to sustainable organizations.
Finally, leaders need to be skilled at communicating with colleagues across functions and organizations. This is crucial for driving and maintaining alignment. To do so, in addition to listening well, leaders must be able to adapt their communication style to be more inclusive and to engage widely diverse groups. They need to speak the language of varied stakeholders. They should be able to explain complicated topics in simple terms to a non-technical audience; or speak passionately about ethics to one audience, while emphasizing product quality or business growth to another. Communicating well with different audiences is a foundational skill for leading a sustainable company.
Leveraging corporate leadership for a more sustainable world
Leading a sustainable company requires all the diverse skills it takes to lead any enterprise. But it takes more. Sustainable leaders create a shared vision that clearly articulates the organization’s focus on social and environmental impact. They cultivate deep understanding of the stakeholders that make up and surround their business, finding ways to maximize value across stakeholder groups. They ensure alignment between vision, culture, and stakeholders. And while their high ideals put the wind at their backs when it comes to recruiting, they also need to actively empower their people.
As corporations increasingly “own” the sustainable future of the U.S., CEOs should recognize that they have an unparalleled opportunity to drive positive change. After all, what’s leadership if not an effort to create a better world?
A special thank-you to Jennifer Brennan, Tatum Wheeler and Ariel Gilbert-Knight for invaluable assistance in preparing this article.
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