Responsibility is now commercially critical – but are our leaders equipped to invest in ‘for good’ initiatives? Alison Tickner from Cirrus writes for the Australian Financial Review.
Gone are the days when company values were decided by a group of people around a boardroom table to be passed down to employees, stakeholders and customers. If you didn’t like those values, you could take your business and yourself elsewhere. Except you couldn’t really, because most businesses were fundamentally the same. You can visualise this as a classic pyramid – with the small pointy end at the tippy top calling the shots for the majority below.
However, some time over the last few years – and perhaps at first imperceptibly before picking up some serious pace – that pyramid has inverted and the power to decide company values now lies in the grassroots: with the customers, employees, stakeholders, providers and communities informing leaders what a company should stand for in return for their business and loyalty. This is a driving force behind Environmental, Social and Governance (ESG) and the shift is being played out on the bottom line.
There is a challenge – a tension – in this for our current and future executives. The ability to execute a plan is becoming secondary to the ability to listen and respond to issues. Future executives need to be au fait not only with how to interpret a spreadsheet, but to also understand the implications of climate change on their business (and their businesses impact on climate). They need to understand their role in the upliftment of individuals and communities, and address the practices that exploit others for financial gain. They need to understand that the future of business isn’t conducted behind closed doors and with secret handshakes; moving forward the nature of business is transparent, ethical, measurable – and importantly, executives and directors are being held accountable.
So for executives and future executives, for universities and MBA providers, how do we prepare future leaders not only to lead responsible businesses and to make better decisions, but to make investments with an eye to a future that will also hold up against scrutiny?
To achieve this, we need a new mix of skills – skills in data analytics, in technology, influence and collaboration. We need skills that short-circuit short-termism, that are reflective and responsive in spite of legacy systems and processes that force us to slow down when in fact it’s time to speed up.
Big picture thinking and a questioning mindset
It’s important that executives understand the long-term implications of their current decisions, and that requires a questioning mindset. For instance, the move towards automation, personalisation and real time data sharing presents fantastic opportunities to streamline and improve processes and customer experiences. However, if you are collecting data that includes personal information – can you see beyond current compliance to future issues and opportunities as emerging technologies intersect with current systems? Can you see trends in other marketplaces that you can apply to your own business to make future transitions easier? Can you look beyond there here and now?
Designing ESG targets that are measurable and impactful
ESG targets are naturally going to be more complex to design and measure than your standard profit and loss statement. To lower your carbon footprint may require higher costs for locally sourced resources – but can you pass that cost onto the consumer or do you absorb it and shrink your margins. If your margins are smaller but you have hard data on the benefit your change has on the environment, then does that correlate to a boost in business and customer loyalty that offsets your original investment. An understanding of risk – the risk of action and inaction in this space, and the ability to model scenarios here will help make better decisions.
The power to collaborate and influence
The ability – and willingness – to collaborate and influence will be essential in future leaders, particularly for executives that rely on long supply chains and providers as part of their business model. Are your partners in a position to do good for good’s sake, or do they require incentives, support or preferential arrangements to make the switch. My mind turns to diplomacy, and countries brokering deals with give and take on both sides to achieve an outcome. This will be an essential skill for executives to break out of their own limited spheres of influence.
From ESG to TESG
The ESG agenda won’t wait until executives come to grips with environment, social and governance issues before adding another letter to the acronym. Technology is increasingly shifting from the domain of the CIO to becoming a Board responsibility. This is fundamentally where it belongs. Skills and understanding of the broader applications and implications of technology – from AI and blockchain through to quantum computing – will be essential for good decision making.
Preparing for new levels of transparency
Shareholders want good returns, but they also want to know how you achieved them and how they align to ESG. For executives this will require that processes and decisions are accurately documented, that supply chains are mapped in detail, and partnerships scrutinised for their own ESG commitments and achievements. But then you need to be prepared to communicate and to invite questions. While we have seen many examples of companies upping transparency in response to COVID. But this is the antithesis of how businesses have been run for decades. The expectation – the demand – from employees, customers, shareholders and stakeholders will be for the door to open wider when the temptation may be quietly close the door again.
Future executives have the ability to redefine what a good business looks like and to challenge the role of business in broader economic, social and environmental fabric. By teaching skills that support ESG and sharing lessons around what a good business looks like, we equip our future leaders with the ability and ammunition to make real and lasting change.
Alison Tickner is a Partner & MD Asia Pacific for Cirrus, part of Accenture.
© Australian Financial Review.