Sustainability Leadership: The Way of the Future

Environmental and social issues are shaping up to be some of the most significant opportunities and challenges for businesses in the coming years. The pace of change and scale of the challenges facing enterprises require a new type of leadership.

Business leaders need transformational strategic thinking, creativity, innovation and personal resilience.

Traditionally, the perception has been that sustainability and profitability cannot co-exist, but this continues to be disproven. Sustainability leadership is now a platform for growth and profitability within your business. Businesses with environmental, social and governance principles embedded into their strategy can better mitigate risk and drive profitable growth.

The proof is in the pudding: a massive uptake of responsible investment practices has been seen by New Zealand fund managers in the past two years, on the back of client demand.

KPMG’s Responsible Investment Benchmark 2019 New Zealand report showed the following main findings:

• responsible investment grew to NZ$188 billion in 2018, a threefold increase over five years
• New Zealand leads other major markets, with the highest level of take-up of responsible investment
• the focus is shifting to finding positive investment opportunities in addition to screening out harmful sectors.

Responsible investing has emerged as a fundamental practice for New Zealand’s fund managers and now accounts for more than 70 per cent of total assets under management. The uplift was mainly due to mainstream investment funds making a switch to incorporate responsible investment, such as negative screening, and assessing environmental, social and governance factors that tie into the United Nation’s Sustainable Development Goals.

Last year, the International Monetary Fund (IMF) found the performance of sustainable funds is on par with that of conventional funds. The IMF estimates more than 1,500 equity funds exist with an explicit sustainability mandate.

Investors are increasingly putting money into companies with good track records on environmental, social or governance issues. Any suggestion of a trade-off between financial performance and sustainability has been proven false.

In fact, the recent Sustainable Business Council’s In Good Company report tells us that New Zealanders really want to know more about what businesses are doing and that there is a big opportunity for the business community to showcase its leadership better.

Showing your leadership

HR professionals are in the unique position of being able to make meaningful progress on the social and environmental issues faced by the business, thereby improving the attractiveness of their company. Sustainability leadership is an emerging area of professional development to equip your team with the skills they will need to make a difference.

Leading your company into an unpredictable future will need transformational strategic thinking, creativity, innovation and personal resilience. It will require a sustainable mindset.

Traditional management is shifting to inspiration and coaching, adding value through influencing and enabling others rather than controlling information flows, and building active cultures within the organisation and as well as with partners across their value chains. You may need to work collaboratively and even cooperate with competitors.

Taking leadership in sustainability can have wide-ranging benefits, including:

• attracting talent
• appealing to consumers
• lessening the risk of losing profits to environmental threats
• having happier, more productive employees
• creating cost savings.

Whether it’s demand from consumers and your supply chain, investors or the community, issues like your carbon footprint, waste, ethical products and the changing workforce are becoming more and more important to your social licence to operate.

Businesses with strong sustainability credentials are also highly desirable to employees, with 86 per cent of Kiwis saying it is important to work for a company that is socially and environmentally responsible.

Right now, we are on the precipice of significant changes in the workplace. Employees are driving many of these changes.

The opportunity for your employees to influence brand reputation is huge. Your HR policies and recruitment practices contribute to the overall performance of the business in the long run.

New Zealand’s business community is increasingly looking at how it can embed sustainability into its strategies, practices and communications. More debate and transparency is required to ensure that everyone is ready to step up.