Sustainability Leadership Making Change Happen

Part I The Executive

Part I of “Sustainability Leadership: Making Change Happen”
is the first of a two-part series that explores the human
capital dimension of sustainability. The series is based on
in-depth interviews with leading sustainability executives
in Europe and the Americas combined with research and
analysis conducted by consultants in the Global Sustainability
Practice of Egon Zehnder International.

Part II explores the team dimension of sustainability,

examining the competencies required for teams to address
the challenges and seize the opportunities of corporate
sustainability initiatives.

Christoph Lueneburger
Egon Zehnder International, New York
christoph.lueneburger@ezi.net
+1.212.519.6020

Richard Murray-Bruce
Egon Zehnder International, London
richard.murray-bruce@ezi.net
+44 (0)207.943.1928
 Sustainability Leadership Making Change Happen
Part I The Executive

After a period of corporate inertia and resistance in many sectors, more and more
businesses are recognizing the need to engage with the issue of sustainability. Calls
to action are coming from all sides, but how should companies respond? Corporate
approaches that relied either on minimum regulatory compliance or on public relations
initiatives are now seen to lack the broader strategic and commercial relevance required
for success. What does it take to lead an organization on this journey? What does it
take to define, promote and implement comprehensive, strategic, and commercially
relevant sustainability initiatives? And what experience and competencies should CEOs
look for when appointing senior executives to lead such initiatives?

From research conducted by our Global Sustainability Practice, it is clear that the
scope of the sustainability agenda itself is viewed differently not only by competitors in
the same industry, but also by different executives within the same organization (see
sidebar “Sustainability: A Working Definition”). Even senior sustainability leaders have
difficulty articulating what good looks like in this role. Because of these differences,
progress can be uneven, alignment elusive, and leading an organization on a
sustainability journey can be challenging.

Our research indicates that the adoption of sustainability by organizations evolves

through three distinct phases. Each phase is framed by clear demarcation points
(although organizational initiatives can be asynchronous in evolving through these
phases); each requires different levels of organizational capability to address
sustainability-related issues and seize related opportunities; and each requires a distinct
set of competencies on the part of the sustainability leader. For senior business leaders
who select executives to lead sustainability initiatives, it is therefore crucial to understand
each of these phases and the leadership competencies they require (Figure 1).

Sustainability A Working Definition

‘Sustainability’ refers here to the generally accepted definition that encompasses three inter-related forms of
sustainability – economic, environmental and social.
Economic sustainability is the ability of an organization to maintain economic profitability by generating value from
its offering of products and services. Successful organizations find a way to translate their relative competitive
advantages into economic values that deliver returns to their owners.
Environmental sustainability is the ability of an organization to ensure that its long-run economic behavior is not
undermining its own or the broader natural environment. This recognizes that natural resources have a finite capacity
either for exploitation or as sinks for pollutants.
Social sustainability is the recognition that an organization operates within a broader social context and relies on
it to prosper and survive. The social dimension of sustainability affects an organization’s activities at every step of the
value chain – from suppliers’ use of international labor to employee, customer and community engagement.

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Figure 1 Phases of Organizational Capability

Challenges and Competencies

The organization The organization is The organization The organization

is unconsciously consciously reactive is consciously is unconsciously
reactive and views and views proactive and views proactive and views
sustainability as sustainability as an sustainability as an sustainability as an
a non-issue or a unavoidable and imperative operational innate core value.
regulatory constraint. pervasive (though competence. Sustainability
Correspondingly, likely arduous) man- Sustainability business metrics are
there are no date. Sustainability business metrics are both consistent and
business metrics business metrics are both consistent and economic over the
for sustainability. inconsistent or non- economic over the very long term.
economic. business planning
horizon.

P hase 1 P hase 2 P hase 3

Early Intermediate Advanced

O rganizational Capability

F rontier
E fficient

T ime

Vernacular Data ➔ Information ➔ Knowledge ➔ Insight ➔ Foresight

Systemic Create Translate Anticipate

Challenge Sustainability Vision Vision into Action Future Needs
Cultivate receptiveness
n n
Embed sustainability for n
Build long-term
Persistently build business
n
operational impact partnerships
case and metrics n
Relinquish central control n
Foster innovation

Key Executive n
Change Leadership n
Results Delivery n
Strategic Orientation
Competencies n
Collaboration & Influencing n
Commercial Orientation n
Commercial Orientation

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Sustainability Leadership: Making Change Happen

In our experience, companies that make the most rapid progress on this journey do
three things well:

■■ First, they determine the company’s state of organizational readiness for change – the
degree to which staff understand sustainability and are committed to achieving it.

■■ Second, they clearly define the mandate of the lead sustainability executive –
establishing their responsibilities and evolving these as key milestones are achieved
in the corporate sustainability program.

■■ Third, they ensure that the right executive is appointed to lead at each phase of the
program – selecting those who possess the right balance of competencies,
experience and personal characteristics to lead the organization through each phase.

Appointing the right sustainability executive for each phase of the program accelerates
an organization’s progress towards securing lasting competitive advantage from its
sustainability programs, but requires more than seeking professionals with subject-
matter expertise. Companies that fail to select the right executive can delay or de-rail
their efforts, running the risk that their sustainability programs are not aligned with
overall corporate strategy and lack commercial relevance.

The Essential Competencies of the Lead S T R AT E G I C

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appraisal for senior-level sustainability
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S T R AT E G I C S T R A T E G ILeadership
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Sustainability Leadership: Making Change Happen

Although the lead sustainability executive will need a baseline of all these
competencies, each phase of the journey tests a different combination of dominant
competencies:

■■ In the early phase, when the organization is largely unprepared to address

sustainability, the key challenge is to make a clear and compelling case for change.
Because the organization is at best reactive to the challenges of sustainability (and
usually unaware of the opportunities), the sustainability leader must be adept
at collaborating and influencing in the course of convincing the organization to
change from unconscious to conscious reactivity. At the end of the early phase,
sustainability emerges as a powerful mandate that is pervasive throughout the
organization.

■■ In the intermediate phase, senior leadership is on board and the task is to translate
high-level commitments into a comprehensive change program with clearly defined
initiatives and hard commercial targets. To make this happen, the lead sustainability
executive must be good at delivering results and needs strong commercial
awareness. At the end of the intermediate phase, sustainability becomes an
organization imperative that is tracked through economic, environment and social
metrics over the business planning cycle.

■■ In the advanced phase, sustainability becomes embedded in the organization’s

DNA, much like quality or financial control. It becomes a core value and the
organization is unconsciously proactive in sustainability. Now the lead
sustainability executive must be adept at anticipating and evaluating long-term
sustainability trends, spotting new opportunities and developing strategies to
re-position the organization to benefit from them. While the need for commercial
orientation continues unabated, it is now matched by strong strategic orientation.
Although there is no endpoint to the advanced phase (as organizations will
continuously raise the bar and leverage sustainability to create competitive
advantage), the lead executive is now working in an environment that views
sustainability as a strategic opportunity and gauges its progress with metrics that
reach beyond the short to medium term.

By understanding how these key executive competencies play out in each of the three
phases, companies can make far better informed decisions about precisely what they
should look for in their lead sustainability executives.

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Sustainability Leadership: Making Change Happen

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S T R AT E G I C Historically,STR nearly
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unconsciously reactive to sustainability: they notO Ronly were
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governmental organization (NGO) scrutiny. More and more,
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realizing that the business is running a range of known and
unknown sustainability risks in its core operations and that
addressing those risks requires dedicated focus and resources.

As an organization begins to engage with sustainability, the degree of organizational

readiness is, not surprisingly, low. The organization lacks a shared and consistent
understanding of what sustainability means. Some consider it to be a regulatory
constraint; others consider it to be either strategically or commercially irrelevant.
Senior executives may not fully appreciate the sustainability threats and opportunities
the business faces. Even if a company appoints a lead sustainability executive, beyond
a general sense that the company needs to act, the mandate for the newly appointed
executive can be surprisingly vague.

Under these circumstances, the paramount competencies of the sustainability leader in

this phase are:

■■ Change Leadership: the ability to understand and overcome the barriers to adopting
sustainability and to identify, define and develop a specific set of business processes
geared to manage previously un-quantified risks and to capture new opportunities.

■■ Collaboration and Influencing: the ability to cultivate and communicate a compelling

vision and gain buy-in from key opinion formers in the organization and the skill
to engage and partner with managers to weave sustainability into the fabric of the
organization.

Lead sustainability executives should be comfortable with ambiguity and be able to

champion sustainability in organizations that may only be starting to appreciate the
need for change or may even be actively resisting it. Self-starters with a thick skin, they
are able to question and counter strongly held views across the business. They also
need to be able to link their proposed sustainability initiatives to overall corporate

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strategy, highlighting the connections and not being afraid to call out, challenge and
bring innovative solutions to the table where there are major areas of difference. Some
organizations we looked at were willing to revise their overall corporate strategies early
in the process. Others preferred to see progress on discrete sustainability initiatives
before making more fundamental corporate strategic changes. All had some level
of strategic engagement in Phase 1 to ensure that initiatives launched in subsequent
phases were linked to the overall corporate strategy and delivered lasting and
commercially relevant change.

Recognizing and addressing major policy and regulatory issues that have the potential
to radically affect the organization’s economic sustainability are critical components
of the initial phase. While fundamental changes to corporate strategy and major new
initiatives take place in subsequent phases of corporate sustainability programs, early
identification of important, but as yet ill-defined risks and opportunities is important.

The challenge can be daunting. For example, one of our interviewees, the head of
sustainability for one of the world’s largest global banks, recalls a meeting in which
another executive stopped talking in mid-sentence, pointed at him and said, “I can’t say
anything more as long as he is in the room.”

The head of sustainability at a leading European retailer reports that this phase can
feel like “kicking at the door” in order to make senior managers understand the
challenges that sustainability poses to the business and recognize the need to engage
in a meaningful discussion. “You are a bit like the grit in the wheel – making things
uncomfortable for the senior team and helping to shake up their thinking,” he says.
“You have to walk a fine line between challenging senior leaders and pushing things
too far and getting rejected by the organization.”

However, even the most persuasive argument for sustainability is unlikely to have
lasting impact if the lead sustainability executive is unable to collaborate with and
influence others. He or she must be able to influence different parts of the business, as
well as external partners and stakeholders, to commit to the effort. They must be able
to listen, build alliances across the business, and align leadership. Further, the role
of the lead sustainability executive is often poorly understood in other parts of the
organization. Under those circumstances, the executive has to make up in collaborative
skills for what may be a perceived lack of clout. And he or she must do so from the
beginning. Says a US manufacturing head of sustainability, “You need to tell a story
that engages the general managers – not eventually, but the first time around.”

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Executives who rate well on collaboration and influencing are, in our experience,
somewhat rarer than those who score highly on change leadership. The right leader
for this phase is driven by the need to change – supporting change, advocating it and
motivating others to initiate change. He or she knows how to get the support of others
and how to build enduring partnerships across organizations and geographies. Both
competencies are critical.

Although the first phase may already contain localized sustainability efforts, they will
typically be unconnected by an overarching strategy. By the end of the first phase,
however, the sustainability leader who can lead change and collaborate effectively will
have brought organizational capability from the state of unconscious reactivity to that
of conscious reactivity: the organization still lacks a comprehensive sustainability
program, but it knows this – and recognizes the need to develop one.

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Sustainability Leadership: Making Change Happen

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EG IC S T R AT E G I C In the intermediate
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sustainability, the mandate for change has been agreed upon by
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that deliver real change.

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gets measured gets done,” which includes hard financial,
environmental and social data. Sustainability initiatives
are regularly reassessed and, where appropriate, adjusted,
expanded, or curtailed. As organizational readiness and organizational capability rise
in tandem, the sustainability leader begins to hand off operational responsibility to
other areas of the business. Heads of business units, for example, adopt sustainability
metrics as an explicit part of their performance dashboards and make sustainability
part of their quarterly and annual focus.

At this phase of organizational readiness, the most important competencies for the
lead sustainability executive are:

■■ Results Delivery: the ability to translate a sustainability vision into a comprehensive

program of targeted initiatives whose success can be tracked based on clear metrics,
and the ability to take corrective action if performance falls short of expectations.

■■ Commercial Orientation: the ability to focus and prioritize efforts that generate
the most value for the organization over the business planning cycle, and the
willingness to abandon initiatives that prove not to address sustainability issues.

To ensure that the corporate sustainability action plan addresses all of the major
issues facing the business, the executive should be able to fully appreciate how issues
as disparate as carbon pricing, resource limitations, and the social components
of sustainability affect the company. At all times, however, the lead sustainability
executive must be able to narrate the commercial relevance of these issues with a firm
focus on risk mitigation and value creation. To do so, he or she must be able to engage
and lead teams – both those who are dedicated and those who are disparate and often
virtual – to tackle complex issues.

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Successful sustainability executives in this phase have strong commercial instincts –

they understand best practices and know how to use them to their advantage. As a
Chief Sustainability Officer of a consumer product company remarked: “Half of what
I do went under names like Lean Manufacturing and Just-In-Time a few years ago; it’s
using less ‘stuff’ and using it more effectively.” And yet much change in this phase does
not come easily: supply chains are restructured and product ingredients eliminated.
Often, these efforts are burdened with significant pressures from PR and marketing
teams to promote eye-catching initiatives before the overall sustainability program has
gained traction and momentum. A Head of Sustainability at a multinational financial
institution pointedly remarked that: “It’s difficult to reign in marketing – green is cool
and they know it. But so much of what we need to do is less about being glossy than
about delivering on goals we have committed to. These may not be glamorous, but they
are hard and measurable. It’s a business, not a Broadway show!”

We have found that executives who rate highly on results and commercial orientation
are consistently connecting market need to competitive advantage. They set aggressive
goals that have real economic impact, and track their progress against plan as they
strive to reach them. These executives are motivated by metrics, and they will drive
hard to deliver.

By the end of this phase, the organization will be conscious of sustainability and no
longer merely reactive to its implications; it will proactively leverage sustainability to
manage risks and create value.

From Functional Specialist to Business Partner

A Comparative Perspective
In analyzing the challenges of sustainability leadership we relied not only on the insights of leading sustainability
executives today. We also analyzed our proprietary database, assessing the evolution of comparable new specialist
roles to predict the likely set of competencies that sustainability leaders will need to become true business partners.

For example, the role of Chief Information Officer (CIO) has evolved over the past 20 years from one defined by
technical mastery to a business leadership position. Successful CIOs who have taken this journey have combined
their technical skill with commercial acumen and strategic awareness to move from being functional specialists
to business partners. Based on our evaluation of 145 CIOs from 28 companies in 9 industry groups (benchmarked
to a control group of 146 CEOs and 110 COOs), the biggest differences between “good” and “outstanding” CIOs lies
in the superior strength of their change leadership and results delivery. In fact, a high level of technology expertise
was not a significant causal dimension of the profile of “outstanding” CIOs.

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reflect social and environmental as well as financial goals. At

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this point, the organization has ceased to think of sustainability

as an externality, but embraces it as a core value; the term
stands for the sustainability of the business itself.
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require a more sophisticated level of engagement with external
stakeholders – issues and opportunities that may have a more
fundamental impact on business strategy and operations. The
lead sustainability executive needs to bring strategic orientation and maintain and
extend the commercial orientation of the previous phase:

■■ Strategic Orientation: the ability to develop multi-business sustainability strategies

yielding high impact in complex corporate and competitive environments.

■■ Commercial Orientation: the ability to focus and prioritize efforts that generate
the most value for the organization over the medium to very long-term, and the
willingness to abandon initiatives that prove not to address sustainability issues.

Sustainability leaders in this phase are inquisitive and reflective, asking tough
questions that probe the core purpose of the organization. What are the ways in which
we can run our business without fear of environmental degradation or social inequity?
How can we anticipate, influence and benefit from regulatory changes that relate
to sustainability? How can we leverage those ways to create differentiation and
competitive advantage in our markets? The task for this executive is one of continually
enhancing organizational capability in sustainability. To do so, he or she will need
exceptional strategic orientation – in addition to resolute competence in commercial
orientation much like that in Phase 2. It is this combination that allows sustainability
leaders in Phase 3 to synthesize multiple and frequently conflicting trends in
developing a coherent long-term sustainability strategy, managing trade-offs, and
ensuring that the overall corporate strategy is aligned with key sustainability principles.

Thus the leader evolves into a futurist, pursuing long-term investments and
partnerships that strengthen and transform organizational assets ranging from
internal capabilities and target segments to supply chains and distribution channels.
He or she must be cognizant of new opportunities arising in the course of tackling

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sustainability issues. For example, one client company we interviewed was struggling
to limit the impact of its waste in a traditionally asset-light industry. When their lead
sustainability executive reviewed the challenge through a strategic lens, the issue
appeared in a fundamentally new way. The lead sustainability executive helped
develop a new co-generation plant that used the waste as a fuel, thereby saving energy
costs and reducing carbon emissions. Another European retail client forged new links
with a charity where consumers could recycle their clothes in return for vouchers to
buy new clothes in stores. As is typical of Phase 3, the leaders of these efforts thought
intensely about overcoming challenges for business, but no less intensely about
creating businesses for challenges.

Such successes are a reminder that strategic orientation encompasses far more than an
abstract intellectual ability. It also means having the creativity to develop new approaches
to sustainability challenges and the courage to question the status quo. For example,
the lead sustainability executive might challenge the way the business typically looks
at investments, demonstrating how hurdle rates might be adjusted to take account of
initiatives that would generate a significant return, but over a longer time period.

As new directions become visible on the business planning horizon, the lead sustainability
executive must also be able to ensure that the appropriate changes are implemented at the
operational level. At the same time, the goal is to disseminate responsibility for generating
sustainability improvement from the corporate level to the business level by embedding
best practices throughout the organization. As the sustainability leader for one of the
world’s leading computer manufacturers succinctly puts it: “My job is to disassemble
my team and spread it across a bunch of P&Ls.” Once initiatives are under way, the
sustainability leader can become a key node for information exchange, facilitating
connections across international business units and functional areas, as well as forging
opportune – and sometimes non-obvious – external relationships.

Now able to leverage sustainability as a corporate value embedded in the organizational

DNA, the lead sustainability executive can focus more sharply on opportunities to change
the game in the company’s industry, seeking out new ways to compete. One seasoned
CSO puts it this way: “I don’t worry about our earnings next quarter – even if it’s
tempting. I worry about the new capabilities we’ll need to show earnings when I retire.”

Executives capable of developing long-term plans that shape corporate strategy can
move the organization to being unconsciously proactive with respect to sustainability.
Sustainability is symbiotically embedded in the operational processes and the long-
term strategy of the business.

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You Are Here

An often repeated proverb holds that “it’s the journey that counts, not the destination.”
Not with sustainability. What counts here is very much the destination - the point at
which the organization can routinely and reliably extract the maximum value from its
sustainability efforts. But to get there, Boards of Directors and CEOs must first know
where they are on this journey. They can do so by asking some fundamental questions:

■■ What does sustainability mean to our organization?

■■ If we are ready to pursue sustainability, what goals and metrics should we adopt?

■■ What competencies do we need to reach these goals?

The answers will provide a compass for the journey ahead and help to select the right
executive to make change happen.

Sustainability Teamwork
The Other Half of the Story Sustainability Leadership Making Change Happen
Part II The Team

Lead sustainability executives cannot go it alone. They need a strong team with the right
competencies for success around them. As with the lead sustainability executive, the
relative importance of these team competencies shifts as an organization moves through
the three phases of engaging with the sustainability agenda. How these competencies
change and the implications for organizations seeking to assemble the right sustainability
talent is the subject of Part II of this series.

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Amsterdam Lyon Egon Zehnder International is the world’s leading privately
Athens Madrid owned executive search firm with some 380 consultants,
Atlanta Melbourne working in 63 offices in 37 countries world-wide. The firm
Bangalore Mexico specializes in senior level executive search, board consulting
Barcelona Miami and director search, management appraisals, and talent
Beijing Milan management. Through our work with a wide range of leading
Berlin Montreal companies, we are fortunate to be able to draw together
Bogota Moscow prominent senior leaders for regular discussions on topics
Boston Mumbai relating to sustainability and corporate citizenship.
Brussels Munich
Budapest New Delhi
Buenos Aires New York
Calgary Palo Alto
Chicago Paris
Copenhagen Prague
Dallas Rio de Janeiro
Dubai Rome
Dusseldorf San Francisco
Frankfurt Santiago
Geneva Sao Paulo
Hamburg Seoul
Helsinki Shanghai
Hong Kong Singapore
Houston Stuttgart
Istanbul Sydney
Jakarta Tel Aviv
Jeddah Tokyo
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Lisbon Vienna
London Warsaw
Los Angeles Zurich
Luxembourg

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