The Role of Senior Leaders in Corporate Sustainability

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The Paris COP21 is over and now the real work begins. Nowhere is this truer than in our global corporations. Indeed many corporate leaders made pledges to do their part to achieve the ambitious goals established in the treaty. Now the question becomes the following: What kind of leadership do they need to actually advance sustainability within their corporations?

Our research on leadership and organizational culture shows that top level leaders, such as CEO’s, are rarely successful in imposing their visions on their stakeholders including their employees, boards of directors, stockholders and customers. However the critical role that they do play is to create and communicate a clear vision broadly and to inspire others to support it. And leaders who talk about a sound business case for becoming sustainable are viewed as having a clearer vision. Likewise those who convey their commitment to a long-term perspective are more likely to inspire support for their vision.

Our work in trying to understand the link of leadership with sustainability has also produced another interesting finding: the belief that leaders are committed to sustainability is very strongly related to employee engagement. And employee engagement has been a top priority for every major organization.

So which are the best communication channels for CEOs to talk about their strategy and progress against sustainability targets? Traditionally the preferred method has been sustainability reporting. The challenge is that sustainability reports have been typically issued separately from annual financial reports, which more often than not shows a disconnect between business strategy and environmental, social and governance issues. Several companies have been communicating their sustainability efforts through sustainability reporting not because they perceive the strategic value thereof, but because of conformity to the gradually accepted practice of reporting on sustainability issues.

And how about the forefront of corporate communications, the quarterly earnings calls? According to our analysis of conference call transcripts and reporting practices of 20 companies across four industries, we found that during the presentation section of the quarterly earnings calls, which are led by CEOs and other top executives, there was a lack of sustainability-related information relevant to the long-term strategy of the organization. Instead, the emphasis of the presentation sections was on short-term financial results. And although CEOs often claim that markets under appreciate long-term investments and ignore issues like employee and customer welfare, while pressuring companies to make decisions that maximize short-term earnings, our recent research has shown that questions around sustainability related information emerged more frequently during the Q&A section of the quarterly calls, initiated by analysts.

What is the role of senior leaders in corporate sustainability? To not only create a clear vision but also communicate it appropriately. It is time for corporate leaders to question traditional practices and start talking about what really is important: how they will ensure long-term shared value creation.

Thanks to Kathy Miller of Miller Consultants for her collaboration on this article.