The necessary speed to enact sustainability solutions has yet to be activated, argue Stuart McLachlan and Dean Sanders, authors of The Adventure of Sustainable Performance: Beyond ESG Compliance to Leadership in the New Era.
Let us be in no doubt – our planetary systems are breaking.
For too long, we have expelled this reality from our lives by ousting any manifestation of it from our places of security. We have instead chosen to hunker down in those organisational strongholds that allow us to dwell in a position of perceived comfort and safety. In a place of conformance, believing we are neutralising the impact of externalities.
But the world is changing. We are in a liminal space and, as much as we might try to resist it, ‘business as usual’ is no longer an option for the long term. The social and economic foundations that we have come to rely upon are being undermined and nature is becoming recognised as an unpredictable yet essential partner if we are to continue to thrive.
At the same time, this ‘essential partner’ is showing signs of stress and even collapse as years of exploitation take their toll on fragile ecosystem balances that we assumed would be ever-unchanging. Owing in part to these seismic changes, the external landscape affecting businesses is shifting, bringing with it questions without clear answers and a lot of uncertainty. In short, we have come to the end of the current era, and change now is inevitable – not optional.
Many leaders have moved through the ranks of businesses or started them up and grown to size inside the principles of endless growth – profit at all costs, destructive competition, an irresponsible approach to externalities, and a myopic focus. The drivers for success in business did not contain sustainability, and it is only just starting to influence core decision-making. This means the huge behemoths are hard to change and the humans that have benefited also have very little motivation to do so. In their situation, why would change seem so pressing and why would they feel the need to move at speed?
The truth is they haven’t felt the need, and nothing has moved fast. There were PR-creating reduction strategies, covering the lessening of waste, water use and carbon, but only at the tinkering edge. There is a reason why, despite the sustainability movement being around for a few decades, all the indicators of change have still been going in the wrong direction. The necessary speed of solutions has yet to be activated. We all need to act – and now. The speed of change has outstripped our ability to adapt alongside it. We failed to act as a collective.
Creating value for all in a total value system
Decarbonising operations, moving from linear to circular, becoming inclusive and transparent in operations and embracing stakeholders who have previously been outside the organisational stronghold is complex. This will not be a linear transition that aligns with the process-driven, highly structured approach of the average strategy consultant or behaviour change expert seeking incremental nudges in improvement. This will be a root-and-branch reapproach on how businesses can thrive in a non-linear model.
The value chain is becoming a more complex ecosystem that is more transparent with a direct link between supply chain resilience, stewardship and brand equity. Value chains and their component parts will be less easy to compartmentalise within the structures of the future. A more accurate way of describing the value-creation processes of businesses in the future is to think of them as value-creating systems that generate total value.
A value system describes the way in which multiple forms of value in and around the value chain are unlocked for investors and stakeholders. We call this a total value system, which describes how assets can drive financial performance over the longer term and create new sources of value that address pressing externalities and planetary and societal risks and needs. An important component of this will also be how enterprises finance their working and growth capital and the nature of the value creation contract they strike with investors.
Co-shareholders with the planet
Allison Dring is CEO and co-founder of Made of Air, a cutting-edge business making carbon-negative materials to transform products in mobility, consumer goods and the built environment. Dring told us that Made of Air’s approach to financing and value creation was unequivocal:
“We wrote the planet into our shareholder agreement. When considering key decisions, the company will treat economics and the planet equally. As we brought in new investors, this was a key clause. Everybody needed to sign up to that.”[1]
While Dring admits that their business model supported this bold approach, as “the more material we sell, the more CO2 we’re pulling out of the air”, she noted that the attitude of investors towards future-focused companies like Made of Air has dramatically shifted. “This was not the old idea of impact investing where venture capital discounts from 10× to, for example, 7×, as there was always a little bit of philanthropy with impact investment in the past. In our last seed round, there was no hint of philanthropy. This is all about green opportunity.”
Made of Air made it clear to potential investors that by investing into their enterprise they would be co-shareholders with the planet and that environmental value was as important as financial return.
By engaging with all stakeholders within a total value system, decisions are more likely to be taken in line with the drivers of business success, so that all stakeholders should gain. This includes delivering superior long-term returns for shareholders. Profit remains the oxygen that businesses need to breathe, the fuel that allows them to pursue purpose.
Fresh perspective
Sean Simpson, founder of LanzaTech, believes it’s all about laying fresh eyes on a problem and considering it from a different angle. Reflecting on LanzaTech’s ambitious vision, he told us:
“We are trying to build an industrial ecosystem. Environmentalists will say the steel industry shouldn’t exist, or, if it did, that it should be based on renewable feedstocks. That’s well and good, but there are trillions of dollars sunk into capital in that industry and they will not get rid of that in the timeframe of the climate crisis. So, we need to take those emissions, take all the waste carbon from that industry and turn it into a resource. Our business model is to partner with other groups to complete a circular economy, where above-ground carbon just goes round in a cycle.”[2]
Simpson and the LanzaTech team see value in the waste emissions of legacy industrial assets and convert this into a valuable resource for other sectors.
Visionaries like Dring and Simpson create value as an outcome of the purposeful and impact-driven way that they found and guide their enterprises, understanding the inputs and outputs to value creation differently.
Adventurous leaders
We are in an environmental crisis that will demand a leadership response, and within that response we all have choices. We can hunker down, tick some boxes, buy time and shore up our pension pot. Or we can become leaders for our time: courageous, humble, heroic and adventurous.
The leaders that people will want to follow in the future will be those who are bold and courageous, unafraid to embrace the world in all its chaos, to make difficult decisions and seek solutions through innovative, entrepreneurial thinking, seeing the fun in the adventure. Leaders that can see the short-term imperative of survival but also the longer-term moral imperative to ensure that future generations can enjoy a healthy planet on which to prosper.
Stuart McLachlan is founder and CEO of sustainability consultancy, Anthesis Group
Dean Sanders is chief enterprise officer at Anthesis Group
[1] Allison Dring. (5 September 2022) Interview with the authors.
[2] Sean Simpson. (18 August 2022) Interview with the authors.
Image credit: Shutterstock
