Leaders facing “unprecedented challenges” is increasingly becoming the norm. Whether coping with the volatility of the 4th Industrial Revolution, the War For Talent, disruptive innovation, inflation, or supply chain challenges – not to mention health risks posed by the ongoing global pandemic – leaders are increasingly being asked to face daunting situations that they are often underprepared for. This is calling into focus the need for courage and a willingness to dive into the crucible of these dynamics headfirst. In this series of articles, we will explore the situations, behavior and personal growth leaders must address and embody to become truly courageous.
We start this exploration of courage with a review of the global context that requires the most courage from leaders over the next 10 to 50 years: driving sustainability. The accelerating consequences of climate change are forcing leaders and organizations to reckon with their impact in new ways. One takeaway from the 26th gathering of the Conference of the Parties (COP26) in Glasgow is that world leaders are acting with more courage in setting discrete actions and metrics to avoid the most catastrophic implications of climate change. However, their commitments are likely not bold enough, and still need to be executed with courageous steps by people on the front lines of sustainability: business leaders from around the world.
In recent years, it has become increasingly clear the health of the environment directly impacts the success of our global economy. Given this, the repercussions of businesses and leaders not acting now to drastically reduce greenhouse emissions have never been clearer. Yet, leaders have been slow to step up as the predictions look increasingly grim. Even small changes in global temperatures over the next decade will have drastic impacts on our environment as the century unfolds.
Estimates now suggest we have less than 10 years to reduce carbon emissions to avoid a dire line in the sand: 1.5° Celsius of warming above pre-industrial levels. The current disturbance caused by interrupted supply chains and logistics shortages has given us a preview of how unchecked rising temperatures would shock the planet and impede fundamental operation of the global economy. It is now estimated that each year of inaction past 2020 will result in $600bn in damages and likely rise to 18% of U.S. GDP by 2080.
“Today we can say with credibility that we have kept 1.5 degrees within reach, but its pulse is weak,” COP26 President Alok Sharma said at the end of the conference. “It will only survive if we keep our promises.” Keeping the world below a 1.5°C increase requires leaders to show the courage to “revisit and strengthen” their existing 2030 targets under the Paris agreement by the end of 2022.
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Among the biggest questions being asked of decision-makers is whether they will make and keep long-term promises around profitability and business success, or maintain a short-term focus on quarterly returns that investors have been thirsty for. A recent example of courageous commitment to address these dynamics (that happened to coincide with a doubling of stock price over the last two years) was seen in Ball CEO, John Hayes’ commitment to transition to 100% renewable electricity by 2030 and sourcing all aluminum from certified sustainable sources.
To better understand how leaders can take a long-term view of business success, we sat down with Andrew Winston, Thinkers50 thought leader and co-author of Net Positive: How Courageous Companies Thrive by Giving More Than They Take to hear his insights about our current global challenges that demand courageous leadership.
Beau River: How would you define the “Net Positive” journey?
Andrew Winston: Fundamentally, we have defined “Net Positive” as a company profiting and thriving by solving the world’s problems, not by causing them. We ask businesses to consider if the world is better off because their business is in it. At a more detailed level, a Net Positive company is one that is improving the well-being of everyone they impact – employees, customers, suppliers, and communities. Many organizations are at the beginning of the Net Positive journey right now. One of the main elements of achieving Net Positive is organizations taking greater ownership and responsibility for all the ways their business impacts the world, good and bad. That’s really the crux of it. This involves building partnerships across partners, value chains, and even with governments and NGOs to solve really big problems together.
River: How do you evaluate those partnerships across organizations, value chains and industries?
Winston: We divide the partnerships into two categories. The first level of change is looking to optimize performance by finding shared solutions for, say, all in your value chain. The Net Positive impact is that you’re not just working on reducing your carbon, you’re trying to solve for the sector, and that means you’re solving a bigger problem. The other category is about more fundamental system change. That means bringing government to the table and advocating for policies that help the whole system move. We know these kinds of partnerships yield greater outcomes. In one example, Unilever Russia worked to change the laws around recycling content, the result was finding more recyclable plastic to use in packaging for the entire sector. Or the work to change the palm oil industry in Indonesia— that’s frankly been a failure for many years, and it’s finally succeeding because they brought together not just the buyers and farmers and NGOs, but also investors to help farmers transition to better practices that decreased clear-cutting of forests.
River: It can get a bit heady talking about the intersection of corporate and human flourishing. Can you share your vision of this intersection and how you see it evolving over the next 10 years?
Winston: We believe that a business cannot thrive for very long unless people and the planet are thriving as well. You need a stable climate for a business, you need resources, you need clean air and water, and an environment that supports our lives. And you need people who are thriving enough to be educated employees, to have enough income and sufficiency in the world to actually buy and be a customer base. It does not serve business at all to have an imploding climate or enduring poverty where there’s billions of people not in the market. There are enormous opportunities for growth and development that are lost if we do not think of these things together and make leadership decisions with awareness of how our systems are connected. If you’re only there to maximize shareholder value, you don’t have much of a purpose, and you’re not likely looking to improve everyone’s well-being.
River: With increasing governmental regulation globally and action around climate change, what should business leaders take away from COP26?
Winston: Companies obviously need to pay attention to this because as these countries continue to commit to reduce emissions, it’s going to impact sectors of the economy in profound ways. The building sector, transportation, utilities, food and agriculture are all ripe for change. There is also a drive for transparency – some of it regulated – that puts pressure on companies to understand and explain their climate impacts. The UK just announced as part of COP26 that they will require public companies to report on their net-zero carbon plans and how they’re going to get there. There are now transparency demands that actually have teeth. Just saying we want to get rid of carbon, we want to use less coal, doesn’t necessarily do anything. Governments are pushing for more transparency to explain the material issues and how a business impacts the climate. That drives deeper changes than simply a commitment to have more renewable energy in a country.
River: How do you see organizations getting away from a focus on short-term returns, lengthening their perspective, and managing investor expectations?
Winston: There are no easy answers, unfortunately. My co-author, Paul Polman, stopped quarterly reporting when he became CEO at Unilever. He did not stop talking to investors entirely, but he basically said to them “I’m going to build long-term value; I’m not going to talk to you every quarter. You can come along or not.” Some investors left, and then very quickly, a bunch came back, and the stock did great over the next decade. But the investor base shifted to groups that wanted longer-term value. You have to show that you care about longer-term value in the form of R&D investment, which has basically plummeted in many companies over the last 10-20 years. The whole system is focused on what’s going to happen this quarter. You have to take a more holistic view about what’s going to make the business resilient, vibrant, relevant over time, and that doesn’t mean only doing things for right now. That takes courage from leaders.