I have heard human resources managers say that many people ‘at the top’ find change almost impossible. Some managers now question the value of investing in the development of senior executives. They argue that companies can move forward when the next generation takes over.
Such thinking is misguided for several reasons. First, climate and social worries mean that companies simply cannot wait for new leaders to mature. The world urgently needs businesses to become a powerful agent for societal change.
Business is no longer just about business. Rather, business is an increasingly powerful force in how our entire world operates.
Second, there is no guarantee that, having moved into influential roles, younger people will not find themselves similarly motivated to grow business at any cost. We can sever the link between stock price and executive pay, but many people will all the same strive for more wealth.
Third, many seasoned executives already see the need for business to become more sustainable. Culture and processes lock in outdated standards, of course, and progress is slower than one might wish. Still, it would be foolhardy not to capitalise on the expertise of willing, capable people.
Executive teams – even those that have enjoyed longstanding success under the ‘profit maximisation’ model – can rethink how they run their businesses.
Below, I set out core ideas for what I refer to as more ‘imaginative leadership’. This is a skeleton of the role description for a CEO who has ambitions to make money and also help lessen risks to the climate and society.
Strategic objectives
- Reporting to the chairman and board of directors, the CEO will lead the company to create value for clients, employees, shareholders and society by delivering the board’s vision for imaginative products and services.
- Our offerings are to bring real value to individuals and where possible enhance their wellbeing. In designing products we cannot cut corners where the outcome would unduly increase risk to customers, wider society or the planet. Imagination must be applied to solving complex problems.
- Across the supply chain and throughout our production systems, it is important to ensure that materials and processes are designed to safeguard the wellbeing of employees, as well as the sustainability of natural resources and other forms of non-financial capital.
- Likewise, ensure that the company fulfils its obligations for corporate reporting and disclosures. This means complying with the letter and spirit of current laws across all jurisdictions. For uniform excellence, the standards of the most stringent legislation should, where possible, be applied across all operating units.
- We also expect the business to strive for transparency against emerging disclosure standards, such as on carbon use, even before these are required by law. Our business will thrive if we better understand cause and effect, and then do the right thing before regulators force us to take action.
- In delivering products and services in the manner above, the company must yield a healthy return for shareholders and employees. Imagination is required to make money and also have impact. We aim to move beyond today’s business norm whereby profit trades against wider value.
- The CEO should ensure that all executives understand the mission and personally commit to a more sustainable approach to the business. Any individuals clearly unwilling or unable to make this transition may be managed swiftly out of the organisation.
- Advocacy for our sustainable business is crucial to the CEO mandate, to help convert customers and regulators to innovative offerings. This will also pave for the way for new markets where sustainable products and services can be traded efficiently.
Personal characteristics
Business is no longer just about business. Rather, business is an increasingly powerful force in how our entire world operates. Several personal attributes of the CEO are worthy of note.
- Moral character: the standards of sound leadership have been known for decades, yet many leaders apply these inconsistently. The demands that business now faces, however, mean that our CEO (and executives) must exhibit true moral character through day-to-day leadership.
- Belief: the CEO must genuinely care about the mission to create value beyond shareholder return. If senior executives only pay lip service to this idea, ‘when push comes to shove’, decisions and actions will put greater profit before everything else. Quite simply, individuals who do not believe in the new model of business will not be fit to run the company of the future.
- Intelligence: running a business to maximise profit is far easier than running one to maximise profit, social impact and environmental return. The CEO needs the intelligence and knowledge – both concepts that are wildly out of fashion – to grasp complex, moving problems that have no right answer.
- Imagination: robust solutions to complex problems will not come easily. Our CEO requires tremendous imagination to guide the senior team in discovering answers to hard questions. Only by thinking beyond the systems and norms of today will we overcome the relentless need to choose between profit and wider value.
- Courage: as business takes on a wider role in society, there will be a need for tough decisions. Companies will have to stand for something, their guiding principle. There will be times, for example, when courage is required to sacrifice short-term gains, or to tell customers that what they are demanding is not in their interests.
Only some executives will embrace value beyond profit
Not every executive will have the capacity, or indeed the appetite, to work in these ways. Whilst many firms are indeed slowly embracing strategies for wider value, for the individual there is a decision to be made – do I truly want to, and am I able to, run this kind of business?
In the next and fourth article in this series, I shall look at what the climate crisis means for business, and how companies might help lessen the threats we now face through global warming.
