24 Nov 2022
Sustainability: the opportunity cost most leaders are missing
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As climate change becomes a main focal point for many businesses, can business leaders afford to put a foot wrong when it comes to climate pledges for their organizations?
Not a day goes by without one company or another making a sustainability pledge. This kind of corporate action is both invaluable and essential if the world is to address climate and social crises.
It’s one thing to set goals and a completely separate thing to achieve them.
From our perspective, we see a lot of companies speak the right words and make the right pledges. Especially when more suppliers expect action, competitors are making their own pledges, and governments and regulators are mounting increasing pressure, the need to make bold statements seems unavoidable.
But behind closed doors, many boards are concerned about how they will meet these pledges and how they will communicate the challenges of the journey to their organization. Many of them are also experiencing a disconnect between their own business outlook and the ESG values and expectations of staff.
We know from experience a gap exists between what leaders say they will do towards achieving sustainability, and how they will do it. Our 2022 Leadership Confidence Index found just 34% of executives said their CEO ensured employees knew about sustainability efforts and the work being done to improve them. Addressing the ‘how’ is critical on several levels.
Why you should communicate the journey and the goal
The current talent market belongs to candidates, and it will for the foreseeable future. The power to pick and choose companies to work for is in their hands, and we see them exercise this ability frequently. If a company’s values do not align with their own, an employee may vote with their feet, and many do.
Dishonesty is increasingly becoming a factor in this equation. If employees feel a company’s leadership is inauthentic about its desire to drive towards sustainability, then they will look for another job, and quickly.
Much of this has to do with current culture. Distrust is now society’s emotional default; so much so that nearly 6 in 10 people say their default stance is to distrust something until they see evidence it is trustworthy, according to the 2022 Edelman Trust Barometer.
The same study found that when considering a job, 60% of employees want their CEO to speak out on controversial issues they care about and 80% of the general population want CEOs to be personally visible when discussing public policy.
Low baseline trust, combined with employee demand for honesty, means CEOs cannot afford to make sweeping statements about sustainability without also communicating a detailed strategy for how the company will achieve these goals. Employees are happy to up and leave at the first sign of what they perceive as fabrication or deceit, especially where sustainability and social issues are concerned.
Being honest about the journey means owning shortcomings, communicating the challenges and risks, and even the financial investment required to meet sustainability goals.
While this level of candor might seem counterintuitive, the large majority of employees now expect it. The 2022 Edelman Trust Barometer found 68% of employees expect their CEO to shape the conversation around global warming and climate change, while 76% felt the same about jobs and the economy, and 74% about wage inequality.
At a time when the employment market is so fierce and high turn-over is hitting bottom lines hard, CEOs cannot overlook the demand for honesty around meeting sustainability goals. Given most companies communicate only their goals, communication about the journey is also likely to make a company stand out from its competitors.
The cost of dishonesty to a CEO
Leadership authenticity has been a watchword for the past couple of years, but the enormity of this trait is now coming home for many leaders. With the stakes so high, boards are increasingly looking for leaders who can galvanize a workforce through trust and belief. Ultimately, they want authentic leaders.
While leadership roles don’t currently hinge on the level of authenticity displayed by a candidate, we can see it becoming more and more important. The drive towards corporate sustainability is only just beginning – in the next five years, it will become an inherent element in every leadership search. Those leaders who cannot demonstrate how they guided an organization towards its sustainability goals and brought its employees on that journey, will struggle against candidates who can.
The cost of not authentically communicating a company’s sustainability journey is threefold. Employee turnover will be high, impacting productivity and driving up recruitment costs, and leaders will find future roles increasingly hard to attain. Being honest about the very difficult road to sustainability is a challenge, but it’s one we expect to see the best CEOs step up to.
To find out how Odgers Berndtson embed sustainability within all scopes of our practice, contact the authors, get in touch with us here or your local Odgers Berndtson contact.
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