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Sustainability leadership or déjà vu CSR?

Sustainability leadership or déjà vu CSR?

13-04-2016 | Column

Willem Schramade, Sustainability and Valuation Specialist within Robeco’s Global Equity team, has flashbacks of Groundhog Day.

  • Willem  Schramade
    Willem
    Schramade
    Sustainability & Valuation specialist

Speed read

  • Sustainability leadership goes well beyond being vocal about how important sustainability is
  • Old-school sustainability is too easy: no targets and limited accountability
  • Sustainability issues need to be internalized across corporate functions

In the 1993 motion picture 'Groundhog Day', a weatherman finds himself in a time loop, repeating the same day again and again. At some point he's in a restaurant and asks the waitress: “Do you ever have déjà vu?” She clearly doesn't understand the question: “I don’t think so, but I could check with the kitchen.” I often have a similar experience when asking corporate representatives about the integration of sustainability into their strategy and investment decisions. After a moment of confusion, they usually refer to their sustainability reporting - typically an underwhelming document that amounts to telling the world what kind of nice things the company does. This is old school Corporate Social Responsibility (CSR): too easy, no targets, and limited accountability.

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The underlying problem: corporate silos

Many corporations have a highly motivated sustainability team in place that works hard to improve and communicate their firm's sustainability profile. But sustainability isn't an extra something that you can delegate to a separate team. For sure, such a team can be very useful and effective, but only if it manages to mobilize the rest of the corporation. That means having top management commitment, but also reaching key functions like operations, finance, IT and human resources. And this is where it typically fails, even at the most advanced sustainability players.

When I met a board member of such an advanced corporation, I asked him how they integrate sustainability into their investment decisions. His answer was sobering: they simply split the list of proposals into sustainability projects and all other projects. And for the former group, they even take projects with negative Net Present Values, since not doing them is not an option. What I like about that approach is that sustainability is at least prioritized. But this isn't integration, as you still don't know how valuable these sustainability efforts are, and whether they really should happen. It also means that top management fails in really making middle management change their approach. And that's what sustainability leadership is about: a multi-year change process.

Sustainability leadership: strategy, operationalization and internalization

That change process should eventually result in the internalization of sustainability issues across corporate functions, i.e. people in finance, HR, IT, etc. taking sustainability issues into account in their day-to-day decision making. To get there, top management needs to incorporate sustainability issues into strategy and operationalize it. This goes well beyond being vocal about how important sustainability is. It means that management understands very well how sustainability issues affect the corporation's competitive position and the ability to achieve its strategic objectives. Moreover, it makes sure that the strategic implications are operationalized into targets, resources and methods that middle management can use across all functions or silos. If management does this, it can achieve sustainability leadership and might even reinvent its business model. If not, you have déjà vu all over again.

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