Just How Important is the CEO to Sustainability?
Just How Important is the CEO to Sustainability?
According to a survey conducted last year by Accenture and UN Global Compact, 93 percent of CEOs view sustainability as critical to their company's success. And yet, there is scant evidence that it has been implemented extensively at most companies.
I believe this gap exists because most CEOs do not recognize the leadership role they personally need to play to embed it deep and wide in their organizations. From my research, including interviews with sustainability managers at over a dozen large companies, it's clear that the trickle-down effects of a CEO's words and actions have an enormous impact on the company's pace and degree of transformation into becoming more environmentally responsible.
Why is that? By and large, it's because for most employees, the issue is still not considered relevant to the business, and they do not make a connection between sustainability and the company's mission, or to their own day-to-day jobs. So unless employees -- at every level -- see CEO leadership, they are not going to engage and drive change. (The only exception is at the handful of companies where sustainability is so deeply embedded in the DNA that the CEO can play a secondary role.)
"Disruptive change requires the CEO's active leadership on this issue," said Kathrin Winkler, VP of Sustainability at EMC. "Without the CEO's enthusiastic support and active involvement, our sustainability initiatives would not be nearly as integrated as they are with the business strategies." She credits him for his decision in 2008 to "ratchet up" programs and initiatives that have helped EMC achieve many environmental successes in the last couple of years.
But that does not mean that if the CEO doesn't provide active and visible leadership, nothing can get done. It just doesn't get as far, or go far enough.
Dave Douglas, formerly SVP of Sustainability at Sun Microsystems says that as long as the CEO provides a supportive environment, good things can still happen. But to get it ingrained into the business, "deep CEO leadership is required, particularly if the executive staff is not bought into it."
Richard Goode, Director of Sustainability at Alcatel-Lucent also believes that CEO leadership is required, but to get buy-in from middle management. "They're the ones that really need to engage, because they are the ones that translate vision into action," he said.
In some cases, a sudden CEO leadership vacuum on sustainability can have a profound effect. This was borne out at one company where an impassioned and active CEO was replaced a few years ago with someone who made it a much lower priority. In the words of one of the company's CSR leaders, "sustainability efforts have stalled, and morale has also suffered."
Since it's apparent that a CEO's leadership on sustainability is so critical, just what role should he (or she) play on this? And should he be the Voice of Sustainability for the company, either internally or externally?
In regards to the first question, there are actually several roles, of which the three most important are: a) setting strategy & goals, b) communication, and c) holding people (including himself) accountable. These are usually no different from his role as leader of the company, but in this case, he needs to play these roles specifically for sustainability.
Opinions are mixed on the second question. Most sustainability leaders I spoke with believe that within the company, the CEO should be the chief spokesperson. Winkler believes that the CEO needs to be the primary cheerleader to give "sustainability managers the credibility and implicit authority to do what they need to do."
Leilani Latimer, Director Sustainability Initiatives at Sabre Holdings, also believes that the CEO should be the key spokesperson, at least internally. "To achieve transformation inside a company, not just (potentially reversible) change, you need the CEO to be the primary advocate," she said.
Will Swope, VP and former General Manager of Sustainability and Corporate Affairs at Intel, and a 31-year veteran of the company, takes a slightly different view. With a unique perspective from a seat at the table with a few of the company's CEOs, he firmly believes that the CEO doesn't need to be the chief spokesperson for the company, internally or externally. "But he needs to have a clear, consistent voice internally, be good at setting the strategic direction, and good at supporting employees who are working the issues," he said.
Carrie Freeman, Director, Sustainable Business Innovation, at Intel agrees. "The CEO need not be the chief spokesperson, but should be supportive and visible," she said. "But you do need someone in the executive ranks."
In some consumer-oriented industries, the chief communicator role is expected. At Herman Miller, the CEO is the chief spokesperson, internally and externally, according to Paul Murray, Director EH&S. "It's become a requirement in our industry," he said, but noting "his voice is one of many."
Externally, CEO visibility is important, but mostly for a company's image and reputation. There are numerous examples of CEOs who have improved their companies' standing immensely, due to their vocal and visible support of these efforts. But can it hurt if a CEO is not that visible?
"It may hurt the public image at first", said Swope, "if the CEO isn't a visible and loud spokesperson, but actions count far more than words; so if employees, customers and other stakeholders can still see what the company is doing, it's not going to hurt a company's reputation or image in the long run." Intel, HP, and several other companies are certainly prime examples of companies that have achieved much success in sustainability, without a visible leader in recent memory.
On the other hand, if a company is looking to win accolades and there isn't much substance to its claims, a visible and vocal CEO is crucial.
The CEO needs to provide C-suite access and visibility to employees that are working on sustainability issues to impress upon the executive staff that the CEO takes these issues seriously. It also helps employees with removing obstacles.
Recognition and rewards are important too, and even the smallest of actions by the CEO can have a profound effect on employees. Klafter of Applied credits his CEO for the little things like popping in to his meetings to give a pep talk, or to recognize someone for their efforts. These sorts of actions go a long way to show that the company places a high priority on sustainability efforts and builds support and morale.
Another important role for the CEO is to work with the company's CFO to set policy on viewing sustainability initiatives with a broader perspective. "Since the CFO is typically not accountable for environmental goals, many projects may not see the light of day if viewed only through the lens of financial metrics," said Murray of Herman Miller.
Finally, CEOs should network more often and exchange ideas with peers on this topic. Several research participants commented that CEOs are very influenced by their peers, and those that are on the sustainability path should more aggressively promote it, while those still hesitating, could learn a lot from those already on it.
It is unfortunate, to some extent, that the CEO plays such a critical role in driving sustainability in an organization, because with all the other time demands on him, this is an area where his attention will inevitably be limited.
But as we have seen, since sustainability success depends on it, it is up to the CSR leader (if there is one) to better educate and persuade him into a more active and engaged role.