CEMS academics and corporate partners explore the implications of what ‘environmental challenges’ mean in practice for business leaders and schools alike.
In September 2021, a survey of 4,206 CEMS alumni from 75 countries identified environmental concerns as the greatest challenge facing modern business leaders. CEMS decided to harness the power of its unique network of academics and corporate partners from around the world to explore what ‘environmental challenges’ means in practice, what type of leaders we will need to address these challenges and how business schools should be responding.
It’s easy to talk about ‘environmental challenges’ but what do you see those challenges as actually being?
Dr Camille Meyer, University of Cape Town Graduate School of Business: Currently, climate change is dominating environmental coverage. In fact, we are facing a whole raft of environmental challenges. Biodiversity loss, in particular, is extremely concerning as at the current rate of disappearance of species and extinction, we are facing the risk of a human-driven sixth mass extinction
Unfortunately, although discussion is emerging it is not yet where it should be. While some geographical regions might be said to be leading the conversation, no-one has yet grasped the full complexity of the issues we’re facing. Equally there needs to be more awareness of impact – how that will differ around the world and how that effects the urgency of action by individual governments. It is crucial to raise awareness of the full planetary boundaries – where they’ve been crossed, where we are facing more risk and how each impacts the other.
One of the most efficient ways to understand these environmental challenges is to use the planetary boundary framework (established by Rockström and the Stockholm Resilience Centre). This identifies nine areas of concern and shows how they are all deeply interrelated. Take land-use change, for example. Deforestation changes the land-use, impacting the biodiversity and increasing greenhouse gas emissions. Land-use change also effects the phosphorous and nitrogen cycles that are causing dead zones in the ocean.
Professor Lars Jacob Tynes Pedersen Head of the Centre for Sustainable Business at the Norwegian School of Economics (NHH): A further challenge is the debate about who is responsible for driving action. Conversations around a company’s footprint can also be complex. Some pollutants (such as emissions coming out of a chimney) are easy to track back to a particular company – but others (such as microplastics in the sea) are almost impossible. For this reason, we are having two conversations simultaneously. One is around the sustainability effects of the business broadly speaking, and how companies might address them by making changes to business models, strategies and operations. The other is a more value-laden discussion. What should a company act on, regardless of whether it is a win-win opportunity for them? This is exemplified when you consider it in terms of the social arena: a company must take responsibility for human rights violations, yet the discussion is more ambiguous when it comes to the environment.
Mirko Warschun Senior Partner and Managing Director, Board Advisor and Lead – Consumer and Retail Business, Kearney: It’s a vast topic that will certainly have an impact on business, and companies must plan accordingly. For example, rising temperatures and extreme weather conditions will impact agriculture, which in turn, will impact business. Elsewhere, water scarcity will force populations to move. At Kearney, on every project, we consider these topics daily because no business decisions can be taken without first understanding the environmental challenges and implications from industry to industry. If organisations want to be successful, this cannot be delegated to a Chief Sustainability Officer, it’s the daily duty of all leaders.
Angela Hultberg Global Sustainability Director, Kearney: What business leaders must understand, and the good ones already do, is that the climate crisis will have an impact on every aspect of business regardless of how we handle it. For example, you can pay to build a wall to keep the water out of your building, or you can pay to clean it up after it’s come in. Either way, you must do something. Leaders must assign a value to sustainability and a cost to inaction. They must understand not only how climate change is directly impacting their business but what they could lose if they don’t act. Then, irrespective of industry, leaders should feed this thinking into business planning, priorities, and investment decisions. What type of leaders will we need to tackle this crisis?
What needs to shift in order for global organisations to really make an impact when it comes to environmental challenges?
Professor Dirk S. Hovorka the University of Sydney Business School: As companies, we must also move away from the idea that growth is the ultimate goal and that the world’s resources are infinite. Sustainable development is an oxymoron, as you cannot develop indefinitely – there is going to be an end to growth in a finite planet. Leaders need to recognise that if they want their organisations, people and biodiversity – the world – to thrive in the future, they have to change their ideology.
It must shift away from the primary purpose of profit and prioritise other values. We must shift to the primary goal of being good ancestors. To be a good ancestor is to look out for the wellbeing not only of people but of the entire biosphere. Creating capital and wealth and institutions and workforces — these are only intermediate goals which should serve the ultimate goal of human and animal wellbeing. To achieve this, we need to have a broader perspective and broader collective agreement on the goals we are trying to achieve, including leaving a legacy for the future.
Heidi Robertson Group Head of Diversity and Inclusion at ABB: We cannot leave the solution to grand environmental or societal challenges up to governments or global corporations. Each and every one of us can make decisions that influence the world for future generations. It takes all of us to succeed. Every day. For an organisation to make a meaningful impact in this regard, I believe that we must shift from a hierarchical to an ecosystem-oriented modus operandi.
In ABB, we operate in a decentralised business model where empowerment and accountability are key principles. Each of us comes together as pieces of the puzzle to drive the company, environment and community around us, forward.
We have found that younger generations, in particular, thrive on this bold approach emphasizing empowerment. There is an expectation and a desire to influence change, not to be part of a pattern of directive leadership. That is why I am so positive about the next generation—there seems to be an innate courage to take real and decisive steps.
What type of leaders will we need?
Christine Ip CEO Greater China, United Overseas Bank: Firstly, it’s essential that leaders have a strong, growth mindset. This means they are aware of how every small thing can make a positive difference and they exemplify that by living a healthy and disciplined lifestyle, in terms of physical and mental health and wellbeing, and an appreciation of the natural world.
Secondly, leaders must have a determination to succeed and a strong ability to execute. ESG can be very abstract, so leaders need to successfully share the vision, set out very clear objectives, and then set measurements around them. At the end of every year, many slight changes across an organisation can add up to a quantum leap.
Thirdly, leaders must cultivate an open and inclusive mindset. They can and should draw on past experience to inform decision-making, but the world has changed to such an extent that we need to look to the younger generation as well. They are more conscious of ESG, and leaders should be humble, listen and learn from them.
Crucially, leaders must model the behaviours they want replicated across the organisation. This isn’t about setting KPIs – although that’s important – but creating a culture of trust that empowers employees to make decisions that are based on wider ESG considerations. By having KPIs in place that look to wider ESG measures and modelling the right behaviours, people will make slight changes that together add up to a big shift for an organisation.
Leaders must also find the courage to do the right thing – focusing not only on the future of our customers, but on future generations.
Professor Andrew Delios NUS Business School National University of Singapore: We will need leaders who understand who they are, are in touch with their personal values and use these values as the basis for their tough decisions. In an increasingly complex world, its vital to be self-aware, as this will drive your decision-making. Such self-aware leaders will naturally be drawn to organisations whose vision, mission and strategic objectives espouse their values.
Equally, leaders will need to value the importance of introspection, continually reflecting on how they’ve handled challenging situations and how they could do better. This process creates truly authentic leaders that people are willing to follow. Talented people everywhere will be drawn to these leaders, and their organisations, and work collaboratively to achieve shared goals.
We need bold leaders who will set strong organisational objectives that drive the cultural change needed for a greater focus on ESG issues. They must empower employees to develop this change, support it, fight through complacency, build coalitions and martial stakeholders. They need the courage to push the rock to the top of the mountain and then let it roll down.
The will is there, especially among the younger generation. Employees are all citizens who know that something needs to be done to address environmental challenges and who want to make a change — they just need someone to lead them in that direction. If bold, self-aware leaders make these changes they will be rewarded as they will be preparing their people and organisations to manage multiple strategic objectives, which will be key to being a successful corporation in the future.
Professor Dirk S. Hovorka the University of Sydney Business School: Our leadership philosophy must change into something far more collective to avoid climate catastrophe. One common mistake made by many business schools, is the promotion of the ‘guru’ leadership philosophy. The great leader who has a clear vision, can stand on stage and motivate people. The only issue is that while we wait for the guru leader to solve our environmental problems and lead us to the promised land of profitability and corporate responsibility, nothing else happens – no one needs to do anything.
In fact, everyone’s activities are interconnected and there are consequences to our collective activity that we may not see. They may be quite distant, or they may not occur for some time but they’re going to accumulate and have an impact that may be far beyond what we each personally do. If individuals and executives adopt the ‘collective’ leadership philosophy we can effect positive change more quickly. As individuals (acting collectively) we can lead this agenda, adopt positive behaviours, buy from ethical companies, and elect conscientious politicians.
Full interviews with the experts quoted in this article and their recommendations for what this means for business schools can be found in the CEMS report ‘Leading for the Future of Our Planet’