Archaic perceptions of climate change are dwindling and now is the time for leaders to role model purpose-led behaviour and lift the curtain on bad practices, says Chris Bowden, HBS graduate and Founder of a B2B marketplace for clean energy
For c-suite executives, environmental, social and governance (ESG) issues have traditionally played second fiddle. Some have been hamstrung by board members and shareholders, who can often be blinkered by the lure of short-term results or bound to the archaic belief that companies which focus on ESG issues experience a drag on value creation. Concerningly, PwC’s 2020 Annual Corporate Directors Survey found that only 38% of board members think ESG issues have a financial impact on a company.
This negative perception of the climate agenda has resulted in many c-suite executives making unrealistic, unconsidered, and empty pledges; pledges that will still need to be met long after they have left the company. However, creating a poisoned chalice for future leaders is neither helpful nor ethical.
CEOs see opportunity in the ESG agenda
Fortunately, refusing to accept the greatest challenge of our time, climate change, has shrunk considerably among c-suite executives and sustainability is now firmly on the boardroom agenda.
While some businesses spent the past decade committing minimum resources to token programmes, curating outlandish claims of commitment, and for a questionable few, thinking they could buy their way to a greener world, a handful of clever companies already had the wheels in motion. It was these companies who had stopped experimenting and instead prioritised the development of much needed sustainable products.
At the turn of the millennium, the idea of an electric-only carmaker seemed like an eccentric fallacy, not just to consumers but to every other auto-manufacturer too. Tesla, however, was smart and, most importantly, it understood that the transition to a low-carbon economy was inescapable. Tesla understood that although EVs look the same as petrol cars from the outside and perform a similar function for consumers, they are completely different on the inside and require the fusion of software, electronics and manufacturing. They developed a product to meet the needs of social expectations, regulatory demands, investment and technology trends, while other industry titans put on their blinkers, kept their heads down and plugged on, business as usual. It was a dangerous strategy and one that’s left an entire industry desperately playing catch-up.
In more recent years, CEOs across all industry sectors have awoken to the power of ESG strategies in building resilience and securing commercial success. By way of example, a recent PwC survey showed that more than 50% of UK CEOs plan to increase their investment in sustainability and, according to a new report called Taking Stock: A global assessment of net zero targets, at least one fifth (21%) of the world’s 2,000 largest public companies have committed to meet net zero targets. Together, these companies represent sales of nearly $14 trillion USD. This is a victory of many years in the making.
So, what is the catalyst behind this shift? Study upon study has noted that today’s consumers will spend their money with brands that align with their moral beliefs and have no hesitation in snubbing companies which they believe are not pulling their weight. As I type this, Spotify tells me it has collaborated with O2 to launch the first sustainable audio campaign as part of the mobile operator’s commitment to be net zero by 2025. Spotify and O2 are to invest together in nature-based solutions to offset all carbon emissions from O2’s audio activity on its platform for the next 12 months. It’s a welcome reminder that change is afoot.
Employees have an important hand at the table, too; pushing the companies they work for to follow a moral imperative and punishing those which fail to speak out by taking their talent elsewhere.
The reality is that if you have waited for someone to tell you to prepare for climate change, you’re putting your business at risk. This is not only evident in the growing maturity of the ESG movement in capital markets and financial services but also with the improvement in the returns on stock for companies with higher ESG ratings. There is much potential in climate risk mitigation, but it requires a shift in perspective from being triggered by fear to planning for opportunity, and that is no mean feat.
The CEO as the role model for purpose-led behaviours
In the UK, a flood of government legislation has provided more certainty, more focus and more precedent. Sustainability professionals have long banged the drum for climate change with little audience. But there is no time left to explain the need to act to the naysayers, and no amount of peer-reviewed research will help either. Business leaders have been called up to join the cavalry and it is down to the CEO to lead the charge. They need to not only make it a priority, but then need to make it the norm.
Purpose-led behaviours are key to this transition and the unique position of the CEO can make this happen. It is this individual who can raise the ambition of its employees, reflect honestly on challenges and shortfalls, as well as to set a definition of responsible leadership. These purpose-led behaviours will then trickle down through middle management. After all, these are not only the people who split budget, develop products, and lead teams, but they are also our future leaders who will carry this weight of responsibility far beyond our days.
Disruptor brands have already proven the return on initiating such leadership. Scottish brewery, BrewDog, and New Zealand-American footwear company, Allbirds, for example, were cited as inspiring organisations that have used product and services to create a deeper and meaningful connection to the planet and communities, in a recent report by media company, edie, in association with UK energy supplier, Centrica.
Perhaps the biggest challenge facing CEOs is the need to dig deep to unearth bad practices, seek clarity on myths and ensure any claims they make are indeed true to what they say they are. Only when the CEO holds up a mirror to see its true reflection will this important practice become the norm in all levels of a business.
Unfortunately, bad practices are not uncommon in the supply chain and that includes the renewable energy market. Some suppliers in the UK, for example, source energy from fossil fuels and then buy REGOS (Renewable Energy Guarantees of Origin) or even worse, European GOs (Guarantees of Origin) and then package this up as ‘renewable energy’ for their clients. Imagine claiming that your company has committed to green energy, publicised this to your employees and customers in the media, only to find that you’re buying fossil fuel energy. This is just one of the many bad practices we need to lift the curtain on.
Decades of tiptoeing around, ignoring the unequivocal science and embracing the type of box-ticking culture that encourages only standardised ESG issues has left everyone scrambling to avoid the irreversible impact of climate change.
Unless green-thinking, purpose-led behaviours and action runs through the veins of businesses, we will fail to prevent the catastrophic impact of climate change. This is not the time to experiment, this is the time to act. Titans of business may exist as a small collective, but remember, positive change has always been driven by the movement of the minority.
Chris Bowden is the Founder of Squeaky, a B2B marketplace for clean energy. He holds an MBA from Harvard Business School and has also attended Singularity University, the Business School at City, University of London, and the University of Manchester.
