The great challenge of sustainable business is that even as global sustainability trends for climate change and ecosystems loss become more alarming, changes in corporate practices have not scaled at the required rate. Many senior executives seem to share this assessment—in a recent global survey of 1,000 CEOs, only one third felt that business was on track to meet these deteriorating trends.
Where do we look to drive large-scale change for sustainable business?
Levels of Change
Sustainable business practices are driven by external as well as internal changes. External changes arise from stakeholders such as governments, customers, investors, partners, and the general public; and may take such forms as new regulations and standards, customer demand for sustainable offerings, investments in sustainable companies, or public demand for sustainable business. The unfortunate truth today is that these external factors have not yet become urgent enough to drive rapid change.
Internal changes arise inside corporations at three levels (Level 3 being the deepest):
- Level 1: Changes in enterprise and partnership strategies, models, systems, plans, and processes that enable sustainable business practices
- Level 2: Changes in organizational culture and identity that encourage sustainable business practices
- Level 3: Changes in business leadership’s beliefs and values about sustainable business arising from their inner sense of self.
I’ve been involved with changes at all three levels in corporations. For example, my Level 1 work helped implement new models for sustainable innovation in Global 500 firms. The approach was described in a Harvard Business Review article in September 2009, coauthored with the late Professor CK Prahalad and CEF’s Founder, MR Rangaswami.
My Level 2 work helped implement a corporate identity around sustainable growth and was described in a winter 2012 Stanford Social Innovation Review article. It was coauthored with Jochen Zeitz, then-CEO of Puma, and Kevin Kramer, then-President of Growth, Alcoa.
My newly released book, Two Birds in a Tree, describes Level 3 changes among 20 pioneering CEOs, who saw business as deeply interconnected to the world.
I’ve learned two key lessons from my experience implementing these levels of change:
- The change drivers at each level are different. Changes to Level 1 are driven mainly by economic incentives such as ROI and the business case. Level 2 changes are driven significantly by social factors, such as our interactions with others in our corporate settings. Level 3 changes are shaped greatly by inner inspiration, such as the kind of person we are or want to become.
- The deeper levels have a bigger impact on the shallower levels. While all three levels influence one another, internal inspiration greatly affects the way we look at interactions and incentives at other levels.
As we all know, internally committed CEOs and C-level executives can have a transformative effect on sustainable business practices.
The late Ray Anderson of Interface best exemplifies Level 3 changes. Recalling his experience with Paul Hawken’s Ecology of Commerce, Anderson said:
I read it, and it changed my life. It was an epiphany. I wasn’t halfway through it before the vision I sought became clear, along with a powerful sense of urgency to do something. Hawken’s message was a spear in my chest that remains to this day.
The resulting changes to Interface’s culture, business strategies, models, etc., as a result of this inner transformation have now become legendary.
Paul Polman of Unilever also illustrates Level 3’s beliefs and values when he says: “What we have experienced over recent years is not, in my view, so much a crisis of capitalism as a crisis of ethics.” He further adds:
I don’t think our fiduciary duty is to put shareholders first. I say the opposite. What we firmly believe is that if we focus our company on improving the lives of the world’s citizens and come up with genuine sustainable solutions, we are more in sync with consumers and society, and ultimately this will result in good shareholder returns.
The ensuing changes to Unilever’s culture, strategies, and plans—such as the Sustainable Living Plan—have made it the world’s most sustainable company, at least according to sustainability experts.
How do we enable hundreds of companies, if not thousands, to be similarly transformed?
Despite their great importance, Level 3 changes have received the least recognition among sustainability change leaders. This may be because they are hard to measure. But real leadership is much more than managing what can be measured. It is therefore vital that we understand Level 3 changes and how they impact the other levels.
I believe that corporate attention to Level 3 changes will be among the “next practices” of sustainable business, as wise leadership, values-based leadership, conscious capitalism, and related concepts gain traction.
Where do we look to create these “next practices” of sustainable business?
One place to look at is recent research in psychology and behavioral economics that is giving us new insights into our internal drivers of thought and action. Some key findings are that we are more quickly influenced by our intuitive, emotional processes of thinking; conform much less to rational, economic models of decision-making and behavior; and are much less homogeneous in our sense of self than we knew before.
Another rich source of insights–our wisdom traditions–complements these insights from modern research very nicely. While the lessons are many and varied, their overarching theme is that human beings are deeply and existentially connected to other living beings and to nature. Moreover, this interdependence is because of Being, the shared essence of all living beings that is at the root of our existence.
Because of it, we call ourselves human beings, not doings or havings. All of us have an intuitive understanding of Being, which business needs to recognize and include.
I define Being-centered leadership as the effort to lead from a place of seeking to realize Being in business. Some management scholars consider such leadership as the highest and most difficult form of business leadership. Because it deals with existence itself, the concept of Being is relevant to everyone, whether they are atheistic, religious, spiritual, agnostic, or otherwise.
Being-centered leadership combines the wisdom traditions with modern research in psychology and behavioral economics to inspire business leaders to prioritize sustainable business practices. It helps them initiate and persist with changes at the other levels in order to truly make business sustainable.
For Being-centered leaders, sustainability comes from within because of the realization that we are all deeply and existentially interconnected to other beings.
If sustainable business is an existential challenge for humanity, then the leadership solutions need to be no less about the essence of our existence.
About the Author:
Ram Nidumolu is the CEO of Innovastrat, Inc., which helps executives at Global 500 companies develop a corporate vision, strategy and culture for sustainable business. He is also an affiliated scholar at Stanford University’s Kozmetsky Global Collaboratory, a Silicon Valley entrepreneur, and a former professor at leading US business schools. Ram is the author of a just-released book about Being-Centered Leadership, Two Birds in a Tree: Timeless Indian Wisdom for Business Leaders, published by Berrett-Koehler, San Francisco. Ram can be reached by email at email@example.com and on twitter at @twobirdsgroup.