The EFMD business magazine

The EFMD business magazine

Transformational leadership in a VUCA world

transformational leadership in a VUCA world - VUCA sign
Preparing our future leaders to successfully drive the transition to inclusive and sustainable models of growth by Geert-Jan van der Zanden.

It is easy to become pessimistic about the accumulating environmental and social challenges the world is facing, but business schools and leadership development programmes will play a pivotal role in turning these challenges into commercial opportunities.

Economic growth has catalysed enormous progress in the world. But focus on economic growth alone has, in many ways, become a destructive force, promoting short-term wins over long-term prosperity, depleting natural resources and widening exclusion. The global economy extracted and used more resources in the last 6 years than in the entire 20th century; levels of waste have never been higher (CGRI, 2023), and at the current rate, by 2050, there will be more plastic than fish in our oceans (EMF, 2016). We have lost two-thirds of animal life on the planet in the last 50 years, largely due to deforestation for unsustainable food production (WWF, 2022). Water shortage is expected to affect 1 in every 4 people on the planet by 2050, seriously impacting food production and likely to cause geopolitical instability and climate-related refugee streams running in the hundreds of millions (WorldBank, 2021; HLPW, 2018).

1.5C global warmingWe have entered an era of increasingly perverse economic growth, at the expense of social and natural capital. According to the World Economic Forum (2020), $44 trillion of economic value generation – more than half of the global GDP – relies moderately or highly on nature and its services. Annual externalities, the cost to natural capital, of our economic activity were estimated by Trucost (2013) to be $7.3 trillion, roughly 13% of global GDP. As mankind’s presence, activity, and footprint continue to expand, nature’s ability to provide us with its natural services, i.e. ‘absorb’ our impact, sustain us and protect itself and us from the impacts of climate change, diseases and viruses, increasingly diminishes. WEF’s Global Risk Report 2023 concludes that 8 of the 10 biggest risks to businesses and society in the next decade will come from environmental and societal challenges, which according to Swiss Re could shave 11-14% off global GDP by 2050, with lower-to-middle income economies, particularly in areas such as Southeast Asia at risk of reducing their GDP by up to 29%. As a precursor of what could be coming, COVID-19 pushed close to 100 million people back into extreme poverty, living on less than US$1.90 per day (WorldBank, 2022).

There is increasing consciousness among leaders, consumers and capital providers that to manage and mitigate these risks, we need to radically reinvent how we satisfy human needs. We need to revamp the growth model for the societal and environmental realities of the 21st century, to work with nature, not against it, and create value in the long and short term, for many, not just for a privileged few.

farming affected by climate change

But despite big commitments by governments and the corporate sector, collectively, the world is increasingly falling behind on delivering the SDGs, because implementation is hampered by conflicting political ideologies, the interests of legacy industry and a lack of essential societal support. The most obvious and sobering example are the NetZero commitments by the world’s governments. To limit global warming to 1.5C and avoid the chance of catastrophic impacts, CO2-eq (CO2 equivalent) emissions need to be reduced by 45% from 2010 levels by 2030. But based on all available national commitments, CO2-eq emissions are instead expected to rise by 10% by 2030 (UN, 2022) with implementation of even these commitments seriously running behind plan (IPCCC, 2023).

As we fall further and further behind, there is an increased urgency and necessity for radical system-level reinvention, instead of marginal, incremental improvements of the ‘critical systems’ that satisfy basic human or societal needs, such as nutrition, mobility, infrastructure, energy or health. Sustainability is not a ‘nice to have’, it is critical and urgent if we want to prevent the disruptions and the dramatic costs to natural and social capital that are escalating under our business-as-usual model. This need to achieve radical impact in a relatively short period is one of the biggest challenges, but also one of the biggest commercial opportunities of our times. Unprecedented public and private funding are becoming available for this sustainability transition, the environmentally responsible and socially just reinvention of our systems.

Sustainability is not a ‘nice to have’, it is critical and urgent if we want to prevent the disruptions and the dramatic costs to natural and social capital that are escalating under our business-as-usual model.

As a result of our institutions’ failure to avoid war, banking crises, corporate and religious scandals, or to collectively address our major societal and environmental sustainability challenges, and fuelled by media awash with ‘alternative facts’, society is increasingly polarised and levels of trust are at their lowest in decades. Society is increasingly looking to the corporate sector to drive the transformation needed to address societal issues. But radical, systemic change is difficult, especially in an increasingly volatile, uncertain, complex and ambiguous (VUCA) world, because systems are complex, involving multiple actors and stakeholders with often disparate objectives and priorities, as well as numerous interconnected sub-systems with governance contexts and dynamics of their own.

flooding caused by climate change

Practice shows us that unless efforts are made to build system understanding, shared mindset and shared vision across stakeholders, interventions dictated by one actor often lack support and have limited or counterproductive impact at the system level. This became obvious when the French government’s intention to raise taxes on fossil fuels, in an effort to combat climate change, sparked the violent ‘yellow jackets’ protests, eventually forcing the government to reverse its decision. Similar reactions followed the Dutch government’s efforts to curb Dutch farming’s nitrogen footprint by imposing limits and standards on agricultural activity without having paid enough attention to building a shared understanding and mindset with the Dutch farmers and general public, eventually resulting in a landslide election victory of a newly formed ‘Civilian & Farmers Party’.

Paradigm and mindset change are the most challenging, but also most powerful, intervention points for systemic change. In an upcoming ‘Element’ on Systemic Change that will soon be published by Cambridge University Press in their series on ‘Reinventing Capitalism’, together with my co-author Rozanne Henzen, we reflect on emerging paradigms that could facilitate future-fit systemic change and explore the potential and the dynamics of changing mindsets between corporate and public actors and citizens. Business has a historic opportunity to generate impact and new growth as an agent of transformation, aligning strategic vision with a strengthening of organisational capabilities and the development of collaborative networks for the deliberate reinvention of our critical systems.

Sasin School of Management

Business schools and leadership development programmes play a pivotal role in this. In an increasingly VUCA world, it is not only our business, but also our moral duty to educate and equip future leaders as agents of change, exploring and anchoring paradigms that are fit for the societal and environmental challenges of the 21st century. This requires a whole new layer on top of the traditional functional domains of management education. Leadership mindsets, skills and tools can be developed that empower leaders to drive change in themselves, the organisations they lead and the systems in which they operate in sustainable and profitable ways.

Solving sustainability challenges demands that leaders have an entrepreneurial mindset, and Sasin School of Management in Bangkok aims to develop this mindset among its students, introducing real-life consulting projects, action-learning labs and hosting Asia’s longest-running global student start-up competition focused on turning sustainability challenges into shared-value business opportunities.

Sasin integrates sustainability skills and values throughout its curriculum, introducing students to concepts such as nature-based solutions, dematerialisation/circularity, regenerative and inclusive business models and teaching Mindful Leadership, which identifies 6 interrelated capabilities:

    1. Contextual mindfulness: the humility and critical thinking required to gather and make sense of intelligence from a range of sources, to connect the dots between dispersed data points while being conscious of filters and biases, and to engage with trends before they become clear and present.
    2. Future consciousness: the capacity to imagine the future through divergent thinking, using multiple lenses and scenarios, while employing multigenerational empathy and agency over one’s own and society’s long-term destiny.
    3. Systems range: the sense of leadership responsibility and stakeholder empathy to not only run high-performing organisations but to also co-shape and enrich the systems in which we operate by understanding the relationships between the components and actors in a system and anticipating the intended and unintended ripple effects of one’s interventions in that system.
    4. Cross-collaborative competence: the capacity to successfully engineer and lead transformative collaborations with non-traditional change partners, mobilised through a compelling shared vision and trusted relationships.
    5. Radical impact agility: the ability to maintain a relentless focus on delivering radical impact in the face of volatility, uncertainty, complexity and ambiguity, deploying disruptive intent, an entrepreneurial bias for action, and the mental and physical agility to continuously challenge the status quo, and to explore, develop and evolve radical new models of impact and value creation.
    6. Purpose: the self-knowledge, integrity, moral compass, and clarity of purpose that will inspire others to reimagine and align their efforts with the bigger purpose. Integrated into the teaching of Mindful Leadership are the ethical concepts of the Sufficiency Economy philosophy, first articulated in 1997 by Thailand’s King Bhumibol Adulyadej as an alternative to an economy of excess risk that had led to the then-current economic crisis. His vision was that of an economy that was sufficient rather than excessive, with a concern for gradual, all-encompassing development across society, rather than just for affluent urban elites, and that moves forward with care, economy, and foresight to avoid mistakes (Mongsawad, 2012). The Theravada Buddhist values of moderation, reasonableness and risk-resilience serve as the foundation for the Sufficiency Economy philosophy, providing strategic guidance for companies in their aim to be ethical, sustainable businesses. It applies the Buddhist practice of mindfulness in business decision-making, enhancing systemic understanding and stakeholder awareness, promoting responsible risk management and shared value creation. The Sufficiency Economy encourages two particular character virtues, which are particularly relevant in today’s atmosphere of distrust, polarisation, greenwashing, and disinformation – knowledge and integrity – as essential pillars for good management and healthy stakeholder relationships.

By focusing our intervention as educators on the most powerful levers for systemic change, the ability to transcend paradigms and develop new mindsets, we can create a generation of more rounded, humanistic leaders who can lead the transition to a future of more environmentally sustainable and socially just models of value creation. Our mindful decisions and ability to achieve positive systemic change in the next 30 years will determine our collective future in the next 300 years and beyond.

transformational leadership in a VUCA world

Further information:

Further insights on leadership for systemic transformation can be found in the ‘Transforming our Critical Systems’ in Cambridge Elements by Cambridge University Press.

Geert-Jan (GJ) van der Zanden is Visiting Professor and Senior Advisor on Sustainability Leadership, Sasin School of Management.

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