Executive leadership is the most important role in the organization. It is the leader's job to set the vision, strategy, values, and set the tone for the organization. And at such a level, you always have things to handle. During Covid-19 executives faced tremendous pressure and challenges. And there seems to be no end to it yet.
So now the question becomes - how to solve them – when so many destinies rely on you and your judgment?
While conducting research since March on how to assure sustainability for different kinds of companies in multiple sectors I interviewed and surveyed prominent business leaders.
They provided me with a great deal of insight into how to lead in the 21st century while using business for good, no matter the circumstances. Yes, more and more business leaders are focused on the legacy side of the business.
In my work I also focus on business sustainability in the context of some basic life lessons: be mindful of your behavior, understand the world you live in, and be honest.
But now it’s time for a more practical look at the nuts and bolts of business sustainability.
Business sustainability is a matter of responsibility, awareness, and community or team involvement.
Here are some tips for running a sustainable business.
Business sustainability 101 starts with an honest assessment of your company’s performance “When is it time to ask if the business is sustainable?” asked many leaders during our discussion.
Because business sustainability is a relative term. For example, if your company ships $1 million worth of product every month and it takes a range between 24-48 hours to ship those products, plus the costs and revenue – it’s pretty easy to determine if your business model is sustainable.
But what about a company like Facebook that has recently faced criticism for its lack of transparency and is under government scrutiny? Business sustainability requires a more sophisticated approach.
These are extreme examples, but even if you are the toughest player in an industry you can face interesting or unique kinds of challenges that can jeopardize the business. Facebook has multiple legs and if one business line doesn’t work out the other could keep things afloat. Not to mention the power over data, the most controversial, yet the most powerful tool they possess.
It needs to include a quantification of how sustainable your business model is. “Sustainability is a company’s ability to thrive long after its business reaches its peak,” writes the executive coach and thought leader Peter Bregman. “For this to happen, a company must have a business model that thrives in the long-term, not only in the short-term.”
Consider a three-step process to assess your company’s sustainability:
Before you can determine if your business model is sustainable, you have to know the components of your business model. This can be challenging because not all business models are created equal. Some businesses operate by doing one thing really well. However, if you are not aware of your own business model and what it is based on, you will not be able to perform an in-depth evaluation.
You need to know:
Business sustainability requires identifying your target customer and deciding if this customer will actually stick with your business. We’ve all been in situations when we are trying to convince someone that we are the best at a particular thing.
Sometimes it is hard to provide evidence or data to support your claim. One solution is to speak with customers who have similar needs or problems.
Without buy-in from your team, you will not be able to make long-term plans and you will not be able to address potential issues that may occur. In the long term, every change in how we live and the way we are governed or govern means changing the way we run our businesses.
So, “It is the businesses that are making the most informed business decisions that will have the greatest impact on the success of society as a whole,” writes Seth Godin.
In other words, employees need to feel empowered to make business decisions that are in the best interests of the company. This can only happen if business leaders have a clear vision of their own business and how they can better help their company be sustainable in the long term.
One of the best things you can do is to empower your team with knowledge. It is important to have employees that understand the overall business vision. This allows them to be empowered with the knowledge to make decisions in their daily activities.
This is a concept known as business literacy. A business literacy education program allows employees to create a plan for the future. It helps people to think critically and communicate effectively. But critical thinking and communication, although are key, they need to be backed up with some additional skills.
Problem solving and creativity are one of the most desired skills to thrive in the current world and the one unfolding under our eyes with AI and machine learning.
I would also recommend conducting employee surveys every few months to gain insight into how your employees are doing, as well as their challenges and goals. Companies that make employee satisfaction a top priority will have happier employees and ultimately a more sustainable business.
We can also approach this from an environmental point of view.
For example, companies use net carbon emissions as a benchmark when evaluating their companies' performance, with emerging economies more committed than Western ones.
However, only a third of companies are monitoring the impact of their activities on social or environmental issues, and companies in low-income countries are under-represented. There is a lack of a single, high-quality system that covers all sectors, with information silos, different reporting tools, and weak governance.
Many companies are still only tackling sustainability from a short-term perspective; they often only see it as a value-enhancing project and often not embedded within their day-to-day strategy. Sustainability has become more than a social, ethical, and environmental issue – it is essential for business success, and companies need to rethink how to manage it.
Companies know that performance sustainability metrics (PSMs) are essential for business growth and effective reporting, however, they are unable to locate these metrics within the context of sustainability, nor do they understand the difference between the different forms of sustainability. Businesses are further hindered by poor understanding of the impact of their activities on the planet and the local community.
Despite the increasing focus on sustainability, business sustainability reporting has not been systematically assessed or adopted by corporate leaders. This means that there is little consolidated data to inform business sustainability strategies or benchmarking. There is also no single comprehensive system to produce sustainability reporting in one place.
This lack of data has stymied progress in developing performance sustainability metrics and standardized measurement tools. However, recent events have created an opportunity for the development of these metrics. Recently, a number of companies have announced a change in the reporting approach. New reports provide a better understanding of the impact of their activities and include PSMs that are grounded in business objectives.
I also facilitated valuable contacts between companies and decision-makers that need to take the environment and decarbonization very seriously.
Companies are now launching PSMs. Big brands have all introduced PSMs, but there is no single market for PSMs. To improve reporting and establish standards, more companies will need to go down this route. It is also important to implement a consistent reporting model in every country where a company operates, which means harmonizing reporting systems.
Business sustainability reporting will have to grow beyond an annual exercise of ensuring compliance. Companies will need to measure the quality of their performance and adopt an objective, values-based approach to monitoring and reporting. This will require a better understanding of social and environmental impacts and the importance of sustainable development goals (SDGs).
There is a lot at stake for the executive leadership who fail to report on the key elements of business sustainability. They risk being seen as unethical, or even fraudulent, and could face financial penalties.
PSM tools also need to be aligned to SDG progress, so that companies can easily track progress and benchmark against peers. Companies will also need to assess how well their corporate governance is aligned with their performance reporting.
In South Africa, some of the regulatory tools in place also add to the risks. South Africa’s Business Continuity and Loss of Production Act (BCPL) and its adverse reporting clause allows a company to charge a minimum wage or a 12-month salary to employees who have to cancel scheduled shifts. This means that companies do not need to include in their sustainability reports how many shifts an employee misses out on because of working on environmental initiatives, as they might be able to reduce these losses by paying low wages to their staff.
A key challenge in developing business sustainability reporting is shifting the discussion from measuring risks to measuring benefits.
Most of the initiatives launched thus far focus on reducing risks, rather than providing an understanding of the benefits associated with a company’s efforts. For example, a company might focus on developing a green building policy, to address sustainability, but no-one will know whether the policy makes a difference.
This means that progress is incremental, with incremental outcomes. The risk of investing in sustainability is that the cost of implementing sustainable practices and achieving tangible outcomes could be higher than the benefits.
To make it measurable, companies will need to establish clear benefits before costs.
To monitor and measure the business’s progress, a balance between analysis of risks and benefits will be necessary. This should include setting measurable goals for sustainable development and then monitor and report on the achievement of these goals.
Achieving that balance will require bringing together the interests of those within and outside the company, as well as various stakeholders. The involvement of government is vital and will have a big influence on the way business sustainability reporting is shaped and implemented.
A clearer picture of the business’s efforts would also contribute to identifying opportunities for further improvement and engagement and reducing risks associated with its practices.
Are you ready to increase your business’s sustainability?