A crisis changes everything. Before the financial upheavals and corporate collapses of the past three years, the word ‘sustainability’ was probably linked in most business minds to well-meaning campaigns by environmental charity groups.
With the sudden demise of Lehman Brothers, and the recognition that dozens of other huge banking names would have disappeared without state support, the term ‘sustainability’ gains a more commercial edge. It is now more evident that the extreme short-termism of recent years, with success measured solely by quarterly reports, creates business as well as societal risk.
According to a recent Harvard Business Review article (The Sustainability Imperative, May 2010, by David Lubin and Daniel Esty), sustainability is the new mega-trend, adopted by Coca Cola and Wal-Mart as well as trendy firms like Whole Foods, and comparable to earlier mega-trends such as total quality or information technology. A mega-trend is one that forces ‘fundamental and persistent shifts in how companies compete’, the authors state.
Paul Polman, CEO of Unilever, boldly announced in November 2010 that the company is committed to long-term sustainability, to such an extent that he actually discouraged short-term investors: ‘If you buy into this long-term value-creation model, which is equitable, which is shared, which is sustainable, then come and invest with us. If you don’t buy into this, I respect you as a human being, but don’t put your money in our company.’
On environmental concern, he was equally forthright: ‘As a father of three children I don’t want to be party to an economic system that steals resources that rightfully belong to the next generation. As a businessman I know that our company requires a continuous supply of raw materials to survive and grow. If that is in jeopardy, which it is, I have a responsibility to all our stakeholders to do something about it.’
For human resources professionals, there is an historic opportunity, and there are some significant challenges.
Sustainability can only be maintained with the right skills, so this policy implies an approach to business that involves a more long-term relationship with highly skilled, committed staff, rather than a transactional ‘hire and fire’ approach. Increasingly, the people and the business plans will need to be developed jointly. This gives human resources executives more influence, but also more responsibility. They will be held jointly accountable for long-term business success – but also for initiatives that do not add value.
Not all recent developments support one another, however. For example, the move towards globalisation and diversity clashes with the desire to reduce the carbon footprint of travel.
Communication systems for connecting dispersed workforces may need an upgrade. In addition, recession and the bank bail-outs have led to immigration caps and protectionist tendencies. These trends make it harder to simply go to the global talent store and buy the best skills.
Companies may need to take a longer-term approach to skills development, partially reversing the trend since the 1990s to end corporate universities and the ‘job for life’. But how far do you need to go? Do you have the human capital analytics to demonstrate which are the most effective forms of staff development? The need to manage performance, including poor performance, will remain.
Reward systems may require an overhaul. It is expecting too much of reward policy to shape all behaviour, but HR professionals have to guard against financial incentives that undermine corporate objectives. In the banks, very high bonuses, based on a crude snapshot measure of profit, encouraged individuals to take risks that imperilled the very future of the organisation.
My experience working with very senior executives at multinational corporations convinces me that an increasing number are genuinely committed to a more ethical, long-term approach to governance. Commitments to sustainability and creating great careers for their staff are not just statements in the annual report, but genuine policies that make business sense. But corporate leaders face considerable pressure in meeting these challenges.
They will need the expertise of the HR function, not only to give technical advice on reward, training and teamwork skills, but as genuine business partners shaping the business and people strategy together.
Neela Bettridge, is an executive coach and co-founder of Article 13