Accelerating Sustainable Business Leadership
By Hans Reus
When helping companies appoint senior leaders, my colleagues and I have noted an area in which most organizations can improve substantially. Sustainability qualifications aren’t given the importance they should have in the selection of senior business leaders, in comparison with digital expertise and diversity, for example. For the long-term financial health of companies and their stakeholders—as well as the world as a whole—it is vital that selection criteria for senior business leaders include a sustainability track record, sustainability competencies, and a sustainability mind-set.
Our society faces gigantic challenges, including addressing climate change; providing food, clean water, and safety; developing clean and affordable energy; and reducing inequality, to mention just a few. The United Nations’ Sustainable Development Goals provide a universal framework and roadmap for addressing these challenges.
The Sustainable Development Goals present significant financial opportunities for companies in many arenas—for instance, by opening new markets, recruiting and retaining top talent, and attracting favorable investments. Conversely, companies’ formidable financial resources, technologies, brands, human capital, natural resources, and intellectual property are crucial for achieving the Sustainable Development Goals. The private sector and the Sustainable Development Goals reinforce each other.
This mutual reinforcement can lead to an upward or a downward spiral for companies. Companies’ total net impact on society is becoming increasingly transparent, thanks to reports by specialized sustainability rating agencies, NGOs, academia, and accountancy firms, and these reports are shared quickly via social media. As a result, companies that have a material positive impact on society early on will benefit substantially. Conversely, companies that fail to have such an impact soon enough are likely to face challenges such as stringent regulation, a higher cost of capital, losing out in the talent market, or even losing their license to operate.
Some companies are already playing in the forefront of sustainability. Those companies have been established or transformed by sustainable business leaders—business leaders who not only possess the required experience and competencies that all top-tier business leaders need to have, but who have a sustainability mind-set as well. They balance long-term and short-term results well, and they create value for all stakeholders, not just short-term results for their shareholders.
Unfortunately, we don’t have nearly enough of these sustainable business leaders, and their numbers are not growing quickly enough.
A review of recent searches conducted by Russell Reynolds Associates, the global executive search firm where I work, indicates that a sustainability mind-set is a key criterion in only 5 percent of searches for senior business leaders. Contrast that to diversity, which is a key criterion in over half of such searches, and digital capabilities, which are sought out in one-third of such searches.
To accelerate the appointment of sustainable business leaders, smart businesses will add a sustainability mind-set, competencies, and experience as required selection criteria for new appointments. They will also educate and incentivize current business leaders with respect to sustainability.
Interviewers can evaluate a candidate’s sustainability mind-set, competencies, and experience by probing for the sustainability initiatives candidates have undertaken in their professional and personal lives and by understanding their values. Psychometric tests such as the Hogan Motives, Values, Preferences Inventory can also be used to provide a great deal of additional insight.
By doing this, companies will select strong leaders who are likely to generate attractive long-term financial results while substantially contributing to the Sustainable Development Goals. That is highly rewarding for both current and future generations, and it is in the best long-term interest of the companies themselves.
This blog summarizes information presented more fully in a white paper from Russell Reynolds Associates. For the full article, please click here.