- CEO and management team committment is essential for true sustainable value creation
- A scorecard that includes cross-functional sustainability metrics is required to change behaviour
- Both combined will lead to sustainable business performance
There is a lot of lively debate in the private and public sector about what sustainability actually means and who should lead the paradigm shift from the current linear economy model towards a more sustainable, inclusive and circular economy.
During my discussions with corporate leaders, public sector institutions, policy makers and consumers, I have learned that there are many definitions, perspectives and expectations when it comes to sustainability. Everyone has their good reasons to defend their position and to support a certain course of action (or inaction).
Looking at the few companies that can be considered to have a sustainable business model or that are on the way to build one, I believe there is a success formula that opens the path towards sustainable business performance:
The success formula is MC + SSC = SBP
Management Committment (MC) and a Sustainability Scorecard (SSC) that is integrated into the existing means of performance management, opens the path towards sustainably better performance (SBP).
A management team that is committing itself to create economic, ecologic and societal value will take fundamentally different decisions than what we see at propably 95% of the companies today. With a sustainability scorecard at hand, that includes sustainability in all aspects of the core business (e.g. products and supply chains), the management team will embark on a journay that will lead to sustainably better performance and lasting results.
I can understand that the majority of management teams that lead large multi-national or midsized corporations today, are more intrigued by continuing on the current path with major focus on economics in the core business and a litte bit of CSR and sustainability activity at the side. Why bother? It has been ‘the right way of doing things’ for so long. Managers were successful, making their numbers and earning well. If you look at performance scorecards in companies today, they are typically structured in a way to push hard for improving all aspects that lead to economic success (Innovation, Customer Service, Productivity, Compliance, …). These elements together work well to feed economic parameters. At the same time this focus also drives an economic model that is resource depleting, creates larger divisions in income and creates societal tensions.
The antidote to this approach is demonstrated by leaders that commit fearlessly to a sustainable business model. Paul Polman at Unilever is currently driving the largest transformation of that kind. But also in small and mid-sized businesses you find leaders that are building companies with sustainable business models, that they can hand over to the next generation.
When it comes to measuring performance with scorecards, we now see more traction on an integrated approach of measuring performance and value creation for multiple capitals. The work of Robert Eccles and Ioannis Ioannou on the positive performance aspects of sustainability on organizational performance and the work of Martin Thomas and Mark W. McElroy on the Multi Capital Scorecards are supporting my hypothesis, that sustainability scorecards will be the navigation tool for visionary leaders to embark on a new path of value creation. One that is resource conserving and creating triple value (economic, ecologic and societal).
Big problems do not always require big change. Often there are small steps that can be taken to create the momentum for others to follow. However, for the time being it will still require the effort to convince management teams that there is more value in building a sustainable business model, instead of continuing on a short term focused and value destroying path.
If you want to know how to get MC and SSC in place, please contact us and let’s discuss how we can apply our FABRIC framework to get your organisation on the path to sustainably better business performance as well.
I’m interested in what you think about the best way to get companies on the path to sustainable value creation? Please comment here.