Leadership and Purpose

How to Create a Sustainable Culture

Kathleen Miller Perkins

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9780367217693
• eBook ISBN: 9780429560941
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Companies that have integrated a contribution to society into their business models are more likely than others to succeed for the long term. This book provides you with information, tips, and tools to assess and strengthen your company for ongoing success.

Through the use of case studies, the book describes the leaders' journeys – the mistakes they made, the successes they achieved, and the lessons they learned. Some are certified as Benefits Corporations (B Corps) because they have incorporated a clear societal purpose into their missions and they are able to demonstrate positive social impact. Others, while not certified B Corps, are at various stages in their commitments to society.

The book is for leaders at many levels, including CEOs, senior leaders, and managers, as well as those without formal positions of authority but who can influence others and contribute to a sustainable culture.

Part I

Fundamentals

The purpose of Part I is to introduce the fundamentals of sustainable companies and sustainable cultures. In the first chapter, I present the arguments for why all companies should become sustainable, performing across three dimensions: Environmental, social, and financial. The chapter introduces the topics that I cover in greater detail throughout the book. It includes a profile of a sustainable company along with a description of the qualities that differentiate them from others. The subsequent chapters in Part I explore the three fundamental building blocks of culture in sustainable companies: Leadership, identity, and trust. Chapter 2 considers the fundamental role of leaders in sustainable cultures and the responsibilities of top-level leaders as well as others with influence throughout the organization. Chapter 3 examines how the unique identities of sustainable companies form and become the foundations upon which the other aspects of their cultures rest. And finally, in Chapter 4, I examine the critical role of trust in enabling sustainable cultures to thrive.

1 Becoming a sustainable company

Making the case

Chapter purpose

While participating in a business development program with other business owners some time ago, I heard us all stating the same goal for our varied businesses. We wanted to ensure that our companies were ready to grow and succeed for the long term. Several of us described our purpose by explaining what we sell, and we defined success as growth and financial achievements.

I was haunted by the narrowness of this vision. Upon further reflection and research, I’ve come to believe that corporate purpose and success in the 21st century must mean more than just the products and services we sell and how much money we make. Our employees and customers, as well as others who are interested in our businesses, want to know who we are and what we stand for both as leaders and as companies. Increasingly, the public expects us to contribute to the welfare of society as we pursue profits.

The purpose of this chapter is to show why all companies should become sustainable, a term I use to describe those that have integrated a contribution to society into the core of their business and that perform across four dimensions: Environmental, social, financial, and governance. The chapter introduces the topics that I cover in greater detail throughout the book. It includes an overview of why a company should care about sustainability, defined as its ability to sustain competitive advantage over the long term through strong financial performance, and the integration of environmental, social, and governance factors into the core of the company’s strategy and operations. The chapter includes a profile of sustainable companies and the qualities that differentiate them from others.

What is a sustainable company?

The meaning of the expression sustainable company in my research and throughout this book is very specific. I use the expression to refer to companies that sustain competitive advantage for the long term by integrating a contribution to society into their business models. These companies show strong performance in the following areas: Financial, environmental, social, and governance.

Committing to a purpose beyond profits is often a first step towards becoming sustainable.¹ Many times purpose-driven companies have integrated social impact into their business models and strategies and have become sustainable as a result.

Companies demonstrate their commitments to the welfare of society in various ways, some through philanthropy and volunteerism, others by striving to do less harm and still others by seeking to do more good. A few have become certified B Corps, defined by the certifying organization B Labs as: “businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”² Throughout this book I reserve the term sustainable company to those that meet a very high standard in their financial, environmental, and social performance by integrating sustainability into the core of their businesses.

Why care about becoming a sustainable company?

As business leaders, we have reasons for caring about how our companies affect our world. Certainly, we desire profits. At the same time, many of us also want to contribute to the greater good of society. Indeed, our ability to balance profits with a greater purpose is likely to influence our companies’ survival over the long term.

Shift in context

The average tenure of companies on the S&P 500 is dropping steadily. Some are bought, some merge with others, and some go out of business completely. Publicly traded firms die off at the same rate regardless of their age or economic sector; from any point in time a typical company lasts only about ten additional years.³ The average tenure of S&P 500 companies is dropping steadily from 33 years in 1964 to 24 years in 2016. Analysts predict that by 2027 the average tenure will have dropped to only 12 years.⁴

In a business world increasingly challenged by bio-engineering, robotics, 3-D printing, artificial intelligence, geo-political upheavals, and climate change, our companies must be resilient, or they could be gone tomorrow no matter how successful they appear today. Evidence points to the importance of balancing the pursuit of profits with the commitment to a broader purpose as central to company survival. In fact, Larry Fink, the chairman and chief executive officer of Blackrock, the global investment firm, wrote the following in his 2017 annual letter to CEOs:

Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all their stakeholders, including shareholders, employees, customers, and the communities in which they operate.⁵

Stakeholder expectations

Certainly, our shareholders expect us to provide them with healthy returns. However, many others with an interest in our companies, commonly referred to as stakeholders, expect us to consider more than maximizing our profits at all costs. Current and future employees, owners and investors, suppliers, customers, and communities join a long list of critical stakeholders. Unquestionably, the importance of each stakeholder to the success of our businesses varies. Nevertheless, most of us face the rising expectations of stakeholders significant to our companies’ success. I cover stakeholder expectations in greater detail in Chapter 6. However, the examples below provide a quick look at what the research is showing concerning the expectations of various stakeholders of importance to many companies.

Millennial employees

People in the workforce expect more of our companies than ever before, no matter what age group they represent. However, millennials’ expectations are particularly significant because they now comprise the largest demographic in the labor force. And they want companies to drive change in the world. The 2018 Deloitte Millennial Survey reveals a striking gap between what millennials think companies should achieve and how they view companies’ current priorities. They think that companies should address the concerns of a variety of stakeholders while they believe that companies only prioritize profits. Some key points from the millennial survey include:

• 75 percent said that businesses are pursuing their own agendas rather than contributing to the betterment of society.

• 66 percent believe that businesses are only concerned about making money.

• 40 percent hold the opinion that businesses are having a negative impact on the world.⁶

Consumers and communities

Consumers of all ages are interested in businesses addressing the challenges in the communities where they operate. A multinational survey conducted in 2017 found that 77 percent of the participants preferred to purchase from companies with a demonstrated record of showing responsibility to the community. In addition, these consumers were willing to pay 5 to 10 percent more for the products and services offered by these companies.⁷

Investors

Investors care more about our record with sustainability than we think according to a 2016 study conducted by the MIT Sloan Management Review in collaboration with the Boston Consulting Group. They found that investors are using data concerning companies’ sustainability records because they have noted the positive relationship between a company’s sustainability performance and financial performance. When asked why companies’ sustainability performance was important to them, they cited many reasons including the creation of long-term value, improved revenue potential, enhanced operational efficiency, and minimized risks.⁸

Clearly our stakeholders – and we all have many – want us to pursue a purpose beyond profits. They want us to recognize the impact that our companies can have on society, and they want us to do something about it. They wish to know whether they can trust us to consider their interests as well as our own. I discuss internal stakeholders, or employees, in greater detail in Chapter 5 and external stakeholders in Chapter 6.

Company performance...

Table of contents

• Cover Page
• Praise
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Foreword
• Preface
• Acknowledgments
• Introduction
• Part I Fundamentals
• Part II The Nature of Sustainable Cultures
• Part III Deep Change
• Afterword
• Appendix: Research Methodology Overview
• Index