place. Retailers like Wal-Mart Stores Inc. are developing sustainability indices; one day soon
comparative product ratings will be posted next to
price tags. The website GoodGuide.com provides a
free iPhone app that rates and compares tens of
thousands of products on their environmental,
health and social impacts. Because of such technologies, the guiding principle for many companies,
increasingly, is caveat venditor: let the seller beware.
As many markets become ever more “transparent” to
environmentally conscious customers, the pursuit of
sustainability will shift from a choice that companies
make to a sheer necessity of survival. It will affect the
de facto “license” of a business to operate — a license
that customers won’t hesitate to revoke.
Many executives understand how these dynamics
will fundamentally alter their businesses, and they
understand that sustainability is, ultimately, about
the sustainability of their own organizations. But
they often stumble in making the transition because
of basic misconceptions about what it will take to
transform their companies. Many make the mistake
of treating sustainability like any other large corporate initiative: It’s actually different in several crucial
ways. Or they assume that it will require a steady,
constant effort over years. In fact, it entails three distinct phases, each requiring different leadership
skills. When implementing a business strategy that
commercially incorporates sustainability, managers
must first recognize how such efforts are unique, and
then understand how best to advance through each
major stage of a sustainability initiative.
Not Your Father’s
Corporate Initiative
Not so long ago, sustainability wasn’t even on the
radar screens of most companies. Today, many corporations view sustainability as a strategic opportunity
and are pursuing it as an operational competence.
The most advanced of these organizations are now
thinking of sustainability as a core value — the fundamental way in which they do business. To achieve
that kind of transformation, executives must first
understand the three basic ways in which sustainability is substantively different from other kinds of
corporate initiatives.
First, sustainability is about operational reality
first, and public perceptions second. Companies that
market their external image beyond their actual accomplishments are risking serious damage to their
corporate reputations, the impact of which can extend
far beyond any individual brands. Second, other initiatives tend to be unambiguously commercial
decisions: costs are cut, target segments are expanded,
pricing is commoditized. In the case of sustainability,
the organization frequently starts not only with an
unclear picture of its potential commercial impact but
also with a blurred definition of sustainability itself.
Third, other corporate initiatives — such as implementing just-in-time concepts or reorganizing from
products to geographies — can generally be a part of a
sustainability strategy, which will itself be greater in
scope. Although other initiatives tend to pivot about a
particular function such as purchasing, IT or operations, sustainability applies to every role and every
action of the enterprise. It therefore requires widespread operational as well as cultural changes.
Correspondingly, our research indicates that successful sustainability initiatives tend to evolve through
three distinct phases. (See “The Three Phases of a
Sustainability Initiative,” p. 52.) However, different
initiatives pursued in concert with one another will
frequently be asynchronous in their evolution. Each
phase relies on different levels of organizational capability and a specific set of leadership competencies on
the part of the individual heading that effort (see
“About the Research”). We’re not talking here about
never-seen-before competencies but about the right
combination of competencies — exceeding the norm
for executives with similar tenures and responsibilities — at the right time. A closer look at each of the
three phases provides details of these competencies
and the leadership challenges involved.
Phase 1 — Making the
Case for Change
When an organization is largely unprepared to address
sustainability, the key challenge is to make a clear and
compelling case for change. Because the organization is
at best reactive to the challenges of sustainability (and
usually unaware of the opportunities), the sustainability leader must be adept at collaborating and influencing
others in the course of the transition from unconscious
to conscious reactivity. At the end of Phase 1, sustainability emerges as a powerful mandate that is pervasive
throughout the organization.
