Does your HR department hold the key to corporate sustainability?
The business world is changing. As the threat of climate change looms larger and the political world seems increasingly paralyzed by convulsions of nationalism and isolationism, the mantle of taking aggressive action to deal with greenhouse emissions is falling squarely on the shoulders of business.
From the actions of progressive businesses, we are starting to glimpse what the corporate response could and should look like — a shaping of new business models based not just on what the market wants, but what science and society wants too.
Reacting to the climate threat is also becoming a business imperative. As BlackRock CEO Laurence D. Fink pointed out earlier this year in a letter to business leaders, companies are being asked to consider their role in broader social challenges beyond financial performance. He warned BlackRock would be prepared to withdraw its support for companies unable to explain their "social purpose."
But the questions Fink posed to business leaders in his letter don't generate easy answers. "Companies must ask themselves: What role do we play in the community?" he wrote. "How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change?"
To deal with these new business paradigms, we need a new kind of business leader, according to Lindsay Hooper, executive director for education at the Cambridge Institute for Sustainability Leadership (CISL).
"There's definitely a skillset shift that will be needed — so there will be much more need to listen, to be effective in dialogue, at building cross-sector collaborations and partnerships, the ability to innovate," she said, explaining that while big business traditionally recruits great business minds that are good executors, they often lack the strategists and thinkers who can reimagine what business success looks like.
After all, the major trends driving shifts in progressive business strategies do not always sit easily with conventional business thinking. For example, the notion of setting targets for businesses in line with climate science rather than operational ability, or delivering the expectations of society when there is no clear conventional business case for change, will be alien to many managers. Transforming a business into a truly sustainable entity is a long, complex process which the market is at times unequipped to financially reward — it takes a particular kind of leadership to see through drastic transformations.
CISL has published new analysis suggesting this message has not yet fully fed through to the human resource departments that often play a crucial but underappreciated role in supporting the strategic direction of an organization.
Its researchers spoke to HR directors and sustainability professionals at 20 multinational companies and found that many are struggling to translate their sustainability aims into HR policy.
"There are a whole range of leadership dilemmas and challenges that organizations need to equip their people to address," Hooper explained. "And from an HR perspective, those haven't necessarily been articulated well enough for the HR people to know how to respond. They know they need their people to be better at navigating external context, but there's not been enough rigor in saying what does this really mean — what are the new skills, knowledge and capabilities people need in this context?"
Part of the problem is that sustainability is seen as a technical issue, something better left to the sustainability wonks to work out. This is not just an assumption made by HR departments — sustainability people often make this mistake about themselves, said Hooper. But while technical skills are important to driving emissions cuts, a shift in business model cannot happen in the sustainability department alone, and a business needs people with a "green" mindset embedded across its departments, she stressed.
To do this, it is crucial to involve HR teams into the work of sustainability departments, so both understand the other's needs. "We were really surprised and found that so many sustainability people actually just never talk to their colleagues in HR and leadership, and beyond that it has never occurred to them to do so," Hooper said. "So even though they are the people that know the kind of change that is going to be required by the business, they just haven't thought about this in term of ensuring people are aligned with this.
"We're asking HR people to think about what the business is going to need in order to thrive in future — we are not saying become an expert in sustainability."
There is also a need to understand that sustainability is not just a young person's game. It's easy to think that as millennial workers rise up the ranks of companies, their zeal for purpose-led business models and passion for green issues will ensure change happens naturally. Not so, warned Hooper. While young people often embody these values, relying on demographic change does not bring change quickly enough to the higher levels of a business, she argued, while also noting that young workers quickly can become embedded in an existing culture and lose their revolutionary zeal.
Instead, a green business shift will require active HR management, Hooper said, and that means encouraging change from the bottom rungs of an organization right to the very top. "Don't see this just as a young person, entry level thing," she advised. "Recognize that actually, and this came up in the research as well, that some of the more senior people who are great at leading the business in the current paradigm are maybe not connected enough to changing social expectations of business and really what's happening on the ground."
There are plenty of opportunities to engage in upskilling board members, she pointed out. For example, the launch of the climate risk guidelines from the Task Force on Climate-Related Financial Disclosures (TCFD) represents a great opportunity to open up a conversation about climate risk and corporate transparency with the senior board. Meanwhile, some senior executives are introducing environmental issues of their own volition — often as their thoughts turn to their business legacy, Hooper said.
But changing a corporate culture is hard. It requires HR professionals engaging with the issues and understanding how workplace demands are set to change in the coming decades. "Educate yourself — get insight into the changing context for the business," Hooper recommended. "Recognize and try and be systematic in thinking about what that will look like in terms of the skills and capabilities internally — don't just see this as a technical thing that your sustainability team is going to deliver."
Then, once the HR department knows where a businesses is headed, and what skills it needs to get there, it can make sure it has the right people in the right place. Broadly, CISL sees more weight in the future placed on employees being able to make moral, ethical and values-based judgements, particularly on whether to use new technologies to maintain or advance the status quo or to deliver a step change in business management. It will require individuals capable of being reflective and adaptive to changing targets, of embracing new ways of thinking, of listening and empathising with differing views, and of thinking innovatively about new commercial opportunities.
Transitioning a business that has enjoyed success in a high-carbon world to one which can thrive in a low-carbon future is a tall order, and it is clear that while sustainability teams will be the linchpins for driving change, HR teams also have a vital role to play. After all, all good revolutions need visionary leaders — and the green business revolution is no exception.