FOUNDATIONS OF CORPORATE SUSTAINABILITY
There are key foundational aspects to corporate sustainability. The triple-bottom line philosophy is the stool on which all else stands. The legs of that stool are to bear weight in balance: a company is to equally emphasize in its course of operations 1) profit-making, 2) environmental pollution mitigation, and 3) societal health and wellbeing or using a different phrase: community-building.
Within the triple-bottom line framework and clearly emphasized among the various reporting standards such as GRI, SASB, and B Lab, three other concepts are critical to ‘authentically’ pursuing corporate sustainability within business. Those are: inclusion and consideration of stakeholders, transparency of operations, and materiality (detailing the most critical and significant aspects of one’s business).
THE ESSENCE OF PURPOSE-DRIVEN LEADERSHIP
Purpose-driven leadership harnesses stakeholder engagement, transparency, and materiality to realize meaningful corporate sustainability goals. Stakeholder inclusion is amplified. The core mission of a company is transparently and declaratively broader than itself. Materiality to a purpose-driven led business includes a set of critical issues broader than a business, a sector, an industry. Thus, materiality becomes an exercise in identifying, prioritizing, and distilling the issues that affect all stakeholders, no matter what name they go by.
THE UNIVERSAL SUSTAINABILITY TRUTHS
If business system boundaries are expanded large enough, we come to see that only two main issues are material to corporations and stakeholders alike: 1) environmental over-shoot (using 3-4 times the earth’s resources that are able to be regenerated) and 2) global warming. If you operate a business or work for an organization that has not or will not articulate the shared challenges we all face, you have not yet employed purpose-driven leadership to effect a sustainable business outcome.
Truly sustainable businesses are working on those great-big, grand, dual goals: driving the regeneration of materials through the supply chain so that earth’s resources are sustained (and not depleted) indefinitely, and seeking the mitigation and reversal of climate change through their choices in how they source and use energy, optimize efficiencies, and support development of renewable energy markets globally.
APPLYING A PURPOSE-DRIVEN FORMULA
The good news is that purpose-driven leadership has a formula. How it gets applied and in what context will differ from one organization to the next but the basic tenants are the same.
RIGHT PURPOSE: Businesses are built with a specific idea in mind for solving a defined problem or to fill a known gap in the market. Anyone that has started a business knows this to be a universal truth. No company starts with the statement, “We need to make a lot of money.”
SETTING MISSION AND VISION
So, too, all companies, at some point early in their existence, set down a clear mission and vision for themselves. What does the company what to accomplish and how will it get to that goal? This exercise is often translated into a Value Proposition: what value does a company’s product or service deliver to its intended target customer?
What is also true is that companies that are 10-, 20-, 50- even a hundred years old can lose their way; experience drift from their original mission and vision statements. Often that is perfectly fine and natural. Companies morph and change as they grow. Fluidity is a valuable trait for survival. But, in that drift period, which can be long or short, hazy or conscious, companies can lose their focus on what is important to it, to its employees and customers, and that loss of mission clarity can start to deeply affect employee motivation, supplier relationships, competitive edge and most visibly, financial performance.
CAPTURE THE ‘TRUTH’ OF YOUR COMPANY
A purpose-driven company has worked to crystalize its identity, to capture the ‘truth of the company’ and its authentic spark, and embody the true self in its culture.
For Fishpeople Seafood, it considers itself a consumer product goods company where sustainability lies at the heart of everything it seeks to achieve. It sources non-depleted, lesser-known yet high-quality fish from sustainably-managed fisheries found in the pacific northwest to support stable economies of otherwise marginalized coastal communities. It pairs its protein with local, organic ingredients and seeks out the most sustainable packaging for its off-the-shelf and ready-to-eat meals with the goal of raising consumer awareness around how and where fish protein is sourced, in what ways quality affects price and health, who are the actors within the supply chain, and why fish protein is valuable and sustainable. To Kip Baratoff, the co-founder of Fishpeople Seafood, sustainability is embedded in all the strategic functions of the business: into the operating structures, work processes and knowledge sets. The entity beats and breathes sustainability. All its stakeholders innately know this truth.
STAKEHOLDER ENGAGEMENT: the core of a sustainably-minded company is the recognition of and engagement with its key stakeholders. Stakeholders are those sets of constituents that have to live with and work under the objectives set-down by business leadership. If strategic priorities are set from above, with no buy-in or integration of stakeholders’ points-of-view, business goals may lack teeth and performance metrics may disappoint and not deliver.
Purpose-driven leadership will seek to leverage stakeholder involvement and build inclusivity structures at all levels of an organization to guide the strategic vision of the business with broader, more global implications. Listening and applying the collective wisdom of company stakeholders can amplify purpose and future vision-getting.
INTERFACE’S MISSION ZERO VISION TRANSLATED
Jay Gould, the CEO of Interface, talks about how he took the time a year into his tenure, to understand what the Mission Zero sustainability vision, set back in 1994 by the company’s founder, meant to employees, suppliers and clients alike. Jay talks about this purpose-driven exercise as getting to the “why behind the what?”.
Jay with the help of an outside consultancy, conducted 1000’s of Stakeholder Interviews asking each individual to articulate what made Interface unique, special and meaningful. Those insights were distilled into a purpose-driven statement, “Lead industry to love the world”. That phrase was then more formally articulated into a vision statement that guides the broader corporate vision of “Climate Take Back”: to operate with the goal of having a net zero carbon impact on the planet. The groundwork of stakeholder involvement in shared vision-making supported Interface to catalyze purposeful action and impactful goal-setting above-and-beyond the operating bounds of the company itself.
UNIVERSAL LEADERSHIP: ‘Universal’ is a nod to what we all know to be true and/or a recognition that we should think and act bigger than ourselves, more broadly than the context of one individual, one company and a single-minded approach to survival and growth. Universal leadership is the embodiment of being a “more than” organization:
- more than a focus on just revenue and market share;
- more than beating quarterly and annual financial targets,
- more than one entity striving, competing and thriving with a potentially zero-sum mentality.
Instead, companies with universal leadership strive to make the world a better place. It’s why more and more companies are becoming B Lab certified. It’s the reason more states are offering a Benefit Company designation when registering as a new business.
A RETRO-MOD BUSINESS NOTION
It’s this retro-mod notion of why business is in business: to provide products and services of benefit to consumers while supporting the communities in which they serve and exist and (this is a newer epiphany) ensure that impacts on and to the environment are mitigated or avoided altogether.
A BROADER ECO-SYSTEM OF OPERATING
Purpose-driven leadership fundamentally understands a business’ place in the broader eco-system of operating. Businesses are not solely competing in a globalized economy. They reside, increasingly precariously, within a planetary system that supports its very existence, not to put too blunt a point on it. The actions that any one organization takes that positively (or negatively) impact that eco-system, profoundly affect the health, well-being and resilience of the environmental and social systems that are inextricably intertwined within it.
It cannot be overstated: purpose-driven led companies strive implicitly and explicitly towards making the world continuously better, more sustainable and resilient for our future selves. That is why companies that state they are purpose-driven, speak of their purpose-driven values that extend beyond the boundaries of their footprints and operational value chains, the talk about carbon neutral goals and circular production models, and seek to accelerate development of renewable energy markets across the globe.
THE GROUP OF RE100 COMPANIES
It is also why the group of RE100 corporations, of which Signify and Interface are a part, create tangible value in a traditionally measured way: by outperforming their financial targets. Interface’s year-over-year quarterly revenue has continuously grown for nine straight quarters since Jay Gould took over as CEO in early 2017. The company’s earnings per share (EPS) is up 43% from last year and the company is expected to finish 2019 with a 15% uptick in net sales growth. This is from a company that has as its vision statement:
“To be the first company that, by its deed, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits – by 2020 – and in doing so we will become restorative through the power of influence.”
How many corporate vision statements from public companies have you read that talk about ‘proving through theirdeeds what sustainability is’? Rare indeed.
SIGNIFY’S 100% GOAL
For Signify, the company has been able to grow its earnings year over year while it actively seeks to make obsolete a large (but declining) portion of its historical product sales: energy-hog incandescent lighting. The company is committed to driving LED-based sales to encompass all of its products and services portfolio. Signify saw a 6% increase in LED-based sales and grew by 2% its revenue (79% of total) from sustainable products between 2017 and 2018. The market is not requiring Signify to make this wholesale transition from energy-inefficient to 100% efficient products. It does so because it believes that the mission to operate at a net carbon neutral capacity is the only vision worth meeting. That is a purpose-driven company.
LOFTY VISION: Purpose-driven companies lead through their actions and not by the words set-out in their corporate sustainability reports. Eric Rondolat, Signify’s CEO, articulates the vision for his company this way:
“At the start of Signify’s new life [spun off from Royal Philips in 2016 and changed its name in 2018], we tried to keep it simple. We have purpose and we have values. We lay out why the company exists: to unlock the extraordinary potential of light for brighter lives and a better world. Sustainability is at the center of the purpose of the company. We display it everywhere and we created identity cards for every employee that states that purpose. We are clear that the market and growth opportunities we are pursuing are also making the world a better planet. That is our purpose.”
A SIMPLE MECHANISM FOR SUSTAINABILITY
Purpose-driven leaders ask their stakeholders to reach higher and beyond the traditional boundaries of an organization’s operations. They ask their constituents to do-away with limiting notions of what can be done now and center around what should be done no matter what. Eric articulates how Signify came to embody its sustainability mission in every action and decision it makes. “There is a very simple mechanism for infusing a sustainability mindset throughout an organization: first, we were talking about sustainability consistently, and then, we were achieving sustainability measures consistently. Signify achieved a reinforcement of its words through results. The message was strong and grew stronger.”
KEY TAKE-AWAYS FOR BUILDING A PURPOSE-DRIVEN ORGANIZATION
- Approach the business of business transformation as a happy challenge and not one to be avoided or not discussed.
- Where there is calculated risk, there is reward. The rewards come in various packages including:
- A deeply dedicated, motivated, and productive workforce.
- A clear, competitive advantage that can be articulated through corporate cost savings but also through product and process innovations throughout a company’s value chain.
- Shaping market perception and personifying business leadership by broadly considering and meaningfully addressing universal challenges we all face today.
- Delivering stronger financial performance, more consistently than that of non-purpose-driven businesses. By one Ernst and Young study, purpose-driven companies enjoy a financial results premium of 42%.
TripleWin Advisory develops sustainable business cases and supports strategic decision-making for companies. In so doing, it provides businesses with continued profitability, relevancy, and longevity in the market. Learn more.