It’s time to dispel the myth of the all-powerful chief executives of large corporations.
Rather than being in control of their destiny, business leaders who care about more than their own bonuses and their companies’ share price, are increasingly feeling powerless in the face of a perfect storm of sustainability crises.
Andrew White, the head of executive training at Oxford University’s Saïd business school says many of the CEOs he speaks to are “searching for purpose but are feeling stuck and disillusioned. They do not know how to change their businesses and feel hampered by the complexity of their supply chains and lack of action by regulators.”
There are several reasons CEOs are not putting their heads above the parapet and showing true leadership.
1. Peer pressure
CEOs are fearful of sticking their necks out in public when the vast majority of their peers, even those with sustainability programmes in place, remain in denial about the scale of the dangers from climate change, resource scarcity, growing inequality and the decimation of biodiversity.
One CEO of a global corporation confided in me recently that even his progressively minded peers are privately hoping he will fail in his mission to press ahead with more radical changes in order to take the pressure away from them having to do more.
“All those entrenched in the current ways of doing business of course are just waiting for me to slip up,” he said. “But what you might find more surprising is just how many people within the sustainability movement also want me to fail.”
2. Lack of board support
CEOs are also finding it difficult to find allies within their own boards who recognise the need for systems change.
The chief sustainability officer of a multinational consumer goods company spoke to me of the “unholy trinity of the chief financial officer, and the heads of HR and legal, who sit at the CEOs table and tend to focus only on taking the path of least risk.
“The other directors close to the CEO focus on short-term commercial needs and risk, so innovation tends to get squeezed out.”
This means that ideas such as integrating circular economy principles by moving from selling products to leasing them, fail to get a fair hearing.
3. Lack of investor interest
Even harder than changing the mindsets of their own directors is convincing shareholders of the need to stop their obsessive focus on short-term profits and consider long-term sustainability.
Not only are those companies with effective sustainability strategies not seeing this reflected in their share price, but with computer-driven share trading the norm, it’s difficult anymore to know with whom to talk. Unilever CEO Paul Polman has tried to get around this by actively seeking out investors who can take a longer view and asking them to invest in the company.
CEOs also live in fear of the swift and humiliating punishment for being seen to put sustainability ahead of profits. We have already seen examples of how leaders, such as PepsiCo’s Indra Nooyi, have come under attack from shareholders for placing long-term sustainability ahead of quarterly financial performance.
4. Stasis in middle management
Changing cultures is proving difficult given the average three year tenure of a CEO and the fact that middle managers are reluctant to change their ways. Try telling the marketing or sales executives that their tried and tested ways of operating need to fundamentally change.
5. Complexity of global economic system
What is also frustrating CEOs is that whatever the size of their organisations, their influence pales into insignificance compared with the size and complexity of our globalised economic system.
While they are seeking ways around this, via industry collaborations and partnerships with NGOs, their businesses lack the skills of facilitation when their focus has traditionally been on competition, secrecy and domination.
6. Lack of political and regulatory support
CEOs are always looking for a safety net to give them the courage to step out from the pack but they are finding little support either from politicians or regulators.
Many politicians still appear to be working at the behest of companies that benefit from the status quo, in particular the fossil fuel lobby, and companies are still failing to see stable regulatory frameworks that give them the confidence to invest in long-term capital projects.
The results of powerlessness
The combined result of these challenges, plus others such as continuing global economic weakness, lack of consumer demand for ethical products and the increasing speed of change, is that rather than looking to the far horizon, most CEOs end up seeking to cope with what is right in front of their noses.
We see this, for example, in companies concentrating on energy efficiency programmes that offer a quick payback even though there is a clamour for them to design decarbonisation targets based on what science says we need to do in order to prevent catastrophic climate change.
White says some CEOs would like to create meaningful change and recognise some of their business activities are unsustainable, but feel caught between a rock and hard place.
If they sell businesses that cause harm, or close them down, they argue that all that will happen is that someone with fewer scruples may just step into the space.
So sometimes all they feel they can do is improve the quality of their products and transparency within their supply chains as well as treading the tricky path of convincing customers to buy more responsible products. But none of these offers radical solutions.
It can feel very lonely if you are a CEO who recognises the need for system change, but we need to see courageous leadership and for business leaders to justify the huge salaries they earn.
That means transcending their own need for status and recognition, facing the wrath of those seeking to maintain the status quo and doing what they know in their hearts to be right.
Read more like this:
- The expert view: top corporate sustainability leaders of 2014
- How Google’s Larry Page became a responsible entrepreneur
- Walmart: the corporate empire’s big step for sustainability
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