Mark Moody-Stuart, ex-leader of two of the largest extractive companies in the world (Shell and Anglo American) recently published a book called Responsible Leadership.
The Ecologist gave it a damning review, criticising its lack of commentary on issues such as climate change, resource scarcity, land rights, human rights, and the protection of natural habitats.
Even the Financial Times, while praising the book as “a memoir that looks back thoughtfully,” called ‘Responsible Leadership’ a “slippery concept”.
This set me thinking.
If this book doesn’t define it, then what does responsible leadership look like, and where can we find it?
I don’t want some ‘bookish’ definition here. We can already argue ’til the cows come home about Sun Tzu’s Art of War (500BC), Machiavelli’s The Prince (1537), or the leadership lessons of General Patton in World War II. That is not what I seek.
No – what I want to know is, where is the practical, cutting edge of responsible leadership today? And why? And what lessons does that hold for the future of business leadership?
Seeking Rigour not Equivocation
Googling ‘responsible leadership’ quickly brings me 28 million web pages. But these are filled with well-meaning but ultimately meaningless phrases such as “takes into account”, “checks”, and “cares about”. Pure sophistry. There is no cutting edge here.
So I turn to the subtitle of Moody-Stuart’s book: “Lessons from the front line of sustainability and ethics.”
The ‘front line’ is what I am looking for. But ‘ethics’, surely, are just as opinion-driven as they were in Aristotle’s day. What’s ethical for Putin is not ethical for Obama, and vice-versa.
Which leaves us with sustainability. What is the leading edge for ‘sustainable leadership’?
‘Sustainable Leadership’ Defines the Front Line
This time google brings me 59 million search results – twice as many as before.
As I read through the links it becomes clear that ‘sustainable’ (unlike ‘responsible’) leadership is making real, practical, tangible differences to business performance, in a number of ways.
For discussion purposes I have grouped these into eight categories:
Some people see ‘sustainable leadership’ as being about compliance with new legislation/reporting guidelines, or compliant transparency (either required by law, or because lenders charge lower interest rates to borrowers with greater transparency).
- Efficiency/Cost Reduction:
As well as reducing costs of capital, sustainability can also be about reducing the costs of business resources, such as energy, water, cocoa beans… Sustainable leadership here is about efficiency.
- Risk Management:
Expensive resources may become in short supply, so an efficiency initiative can turn into a risk management exercise. ‘Sustainable leadership’ here might be about managing operational, financial, or reputational risks.
- People – Our Greatest Resource:
Another ‘resource’ that companies depend on is people. Sustainable leadership positively affects employee motivation, morale and productivity. It also impacts hiring and retention rates, employment practices, and associated costs.
- Extended Supply Chains, Agility, Learning:
Not all employees and resources are directly controlled by the firm, some are purchased from suppliers. So for some companies, sustainable leadership extends into supplier management and supply chain coordination. At large scale this can become ‘organisational agility’ and ‘organisational learning’.
- Lifecycle Analysis, New Product Development:
Extending cost and risk analysis down the value chain (instead of up) brings full lifecycle analysis and new product development into scope. Sustainable leadership here includes innovation, differentiation, high technology, biomimicry, and the ‘race for patents’.
- Truly Responsible Leadership(?)
Then there is sustainable leadership as radical transformation, defining a vision that includes protection of future generations and the environment. The scope here includes strategy, a deeper understanding of the business, and new measurement and reward systems. This is difficult work, which strengthens the management ‘bench’.
- Transformed Communications/Relationships:
Finally, sustainable leadership can also be about transforming communications. Not just for compliance sake, but to develop deeper relationships with stakeholder groups. Here we see topics such as transparency, governance, ethics, community involvement, and community economic development.
This is the scope* of what ‘sustainable leadership’ means to different people around the world today.
Most of these activities are measurable. All are directly tied to improving business performance. This is the ‘cutting edge’ I was looking for.
But I still have two questions.
First, these are all activities that business leaders have been doing for years. Why are we suddenly calling them ‘sustainable’?
Second, given that the activities are so different, what common thread holds them all together? What is the essence of ‘sustainable leadership’?
(*I am sure I will have missed some sustainable leadership activities. Do please let me know if you spot any major omissions.)
A Sketch Map of Sustainable Leadership
To get an overview of how these different ‘sustainable leadership’ activities fit together we need to take a step back, to see the wood for the trees.
- We notice that the Scope of the activities varies, from narrow to broad: from a single department or business unit to a whole supply chain or complete business ecosystem.
- The Focus of the activities also varies: from compliance and cost, to value and the ‘identity’ of what the business stands for.
Using Scope and Focus as axes, we can map the eight activities and sketch out what sustainable leadership looks like today:
We see that the eight activity categories are not separate after all. They form a continuum, running from a narrow self-interest in doing the minimum required, to a wider expression of our identity as part of a greater system.
Frameworks such as the ‘Circular Economy’ can now be understood as a combination of fundamental activities (in this case items 2-7).
Individual organisations carry out the activities that address their business priorities. And though these seem different, they form part of a larger whole.
And although cost pressures may temporarily push companies back towards the bottom left, there seems to be a general movement towards activities in the top right.
Why is this?
Why is Sustainable Leadership Like This?
In a word – globalisation.
Globalisation essentially means that the earth is full.
All businesses everywhere now have access to the same pool of resources. There is no spare, unexploited stockpile to turn to.
Suppliers sell those resources to the highest bidders.
Value chains stretch across the globe, with little spare capacity to cope with interruptions.
Your business can now reach customers anywhere in the world. But your customers can also buy from any business.
A change 10,000km away (whether in technology, social unrest, political decisions, abnormal weather, and so on) can now potentially affect your business in ways that have never been possible before.
Business models are therefore now more vulnerable to greater stress across a wider range of factors than ever before.
This means that business leaders increasingly have to live on the right hand side of the diagram: considering a wide variety of factors.
How do they handle these multiple conflicting decision points? By shifting their focus upwards: from considerations of internal cost, to external value, and (ultimately) to the values that the business and its ‘ecosystem’ stand for – their ‘identity’.
The reason we call this ‘sustainability’ is because the people who were first to notice these issues were those who naturally understood the interconnectedness of the world – like readers of The Ecologist. They then framed these issues in terms that made sense to them – namely ‘sustainability’. And that is the label that stuck as the rest of the world caught up.
But it is no longer purely about ‘sustainability’ in the environmental sense. It’s also about sustainability in a business sense. If you want your business to sustain and prosper in the new global world, you need leaders who can manage and balance a wider variety of factors, and take decisions based on identity and values in a broader ecosystem.
As Martin Wolf put it in the FT recently, “If there is one lesson from the past 100 years it is that we are doomed to co-operate.”
Or, as various studies have found, the best sustainability performers are the best performers, period.
Business sustainability and environmental sustainability are coming together in the 21st century. If you want to be a leader, in Shell or any other company, ‘sustainable leadership’ is where you’ll find the cutting edge skills you need.