Leadership is a topic that receives a great deal of attention and training, yet it remains a difficult and complex process to successfully lead in today’s world. When leadership is viewed in the ESG context it becomes even more complicated.
This is partly because ESG in of itself is a systemic approach, and so is already complicated. When you apply leadership principles on top of that it means that leaders must lead across a wide variety of topics, sectors, scope, timeframes etc. This is not a simple task and if done properly means that leaders must really understand, at least at a high level, a plethora of material subjects and be able to integrate them into strategy, walk the talk in terms of her/his own behaviour and drive longer term issues to maximise positive risk or opportunities and minimise negative risk for the organisation.
Organisations have also changed in the way in which they operate. Previously hierarchical organisations where only a few top people made all the decisions are shifting to be more flexible, and agile organisations are delegating down. This means leaders exist everywhere in the organisation from supervisors to the board. All have spheres of influence and can sink an ESG strategy or change initiative by for example, taking a counter decision or by not prioritising required tasks. ESG requires a culture change more than anything else, and as Peter Drucker famously said, “culture eats strategy for breakfast” and changing culture is a leadership task.
This is therefore a big ask, as it means that the leader needs to be very self-aware of not only her/his own behaviour but also unconscious bias and personal risk appetite. Decision making is becoming a difficult art given the fast pace of change and high levels of uncertainty and complexity, so having that self-awareness of yourself, but also those around you that need to go on this journey with you, is essential. It is no good if you are convinced about a strategy, all implementers in the organisation also need to be convinced, so that they execute with the required level of dedication and find new strategies or innovative ways of implementation.
Organisations often complain that, even with high levels of leadership training, they are not seeing the expected results on the ground. Leading means that people see that you value something, and they see this by the way in which you act, what you say, the decisions you make and who you listen to and surround yourself with. People are complex beings and real change means changing a value system within someone or an organisation, which takes time and patience. Valuing the environment for example, is not something that all people possess and there are very different risk appetites and ESG maturity levels within individuals based on the context, culture, education etc. It is also true that different generations value things differently. Generation Z gives much more value to ESG on average than baby boomers for example. This is why diversity and inclusion are so important in ESG, as having diverse views allows people to see other perspectives and change their beliefs and biases. In the end we need most people to value ESG issues and concepts before we can truly drive business with a purpose.
The new ESG leader must also interact with a much wider variety of stakeholders than in the past. This includes labour, customers, regulators, NGOs etc. Civil society activism and legal challenges are increasing, and stakeholder engagement is therefore becoming an essential part of a leader’s job, across the board. Advocacy and communication are key topics in any leadership development programme as leaders need to be able to have the ability to really listen to them, decide what is material and allow them to influence strategy where appropriate and to be able to communicate clearly and authentically. This is a skill which is not easy to acquire, and people will very quickly pick up if you are not authentic.
ESG leadership requires a mindset that, while competition is essential for any business, collaboration in key areas where it makes sense is equally important and it is how you compete that sets you apart and defines your future sustainability. Working along the value chain is essential to reduce risk and ensure that all your good work is not undone up or down stream. It also means being influential within sector associations etc.
ESG leaders therefore need new skills set, a more diverse network, high levels of self-awareness, great communication skills and future focussed mindsets. ESG mature companies with these types of leaders, can grow and be profitable but on a new, more sustainable trajectory.