In 1987, the United Nations officially defined “sustainability” as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” Three decades later, sustainability has become vital to the performance and sustainability of businesses. As a result, leaders have committed to the cause, not just because it is moral but because it is good for business.
Sustainability has become profitable because of increased consumer activism, greater media attention and investor recognition of environmental and social risks to companies. Indeed, businesses are becoming forces for good, and today’s aspiring business leaders must account for sustainability in their daily operations to succeed, especially in multinational corporations with a worldwide environmental, social and governance (ESG) impact.
How Are Global Managers Working to Meet Sustainability Standards?
Business leaders at every organizational level are meeting sustainability standards by following these developing best practices:
- Determine priorities. Identify universal and cultural drivers through analysis. To the extent possible, priorities should further positive brand perceptions.
- Integrate ESG with products.This includes environmental considerations from energy-efficient manufacturing plants to recyclable product packaging and biodegradable products.
- Invest in process and systems change. From manufacturing to operations, leaders must understand the ESG impact of every internal initiative.
- Forge patient stakeholder and investor partnerships. Not all stakeholders and investors share the same values. It helps to promote the organization to the types of investors who will support ESG initiatives so they support long-term initiatives that may require patience.
- Give back to local communities and charitable causes. Helping the surrounding community thrive supports the local economy and jobs, resulting in better business prospects.
How Are Sustainability Efforts Affecting Business Performance?
Sustainability efforts are great for shareholder value and the bottom line. According to a 2020 McKinsey Global Survey, 83% of C-suite executives and investment professionals believe ESG programs will generate more shareholder value in five years than they do today. These respondents are especially confident about the impact of corporate social programs. In addition, 57% of investment professionals agree on the value of ESG to investors. Furthermore, nearly 80% of executives and investment professionals consider ESG issues in their assessment of potential capital projects, and 70% consider ESG issues in their assessments of a company’s competitors and supply chain.
According to the International Institute for Management Development, companies that rate highly in ESG performance achieved average operating margins 3.7 times higher than those of lower ESG performers. Shareholders also received higher annual total returns, outpacing poorer ESG performers by 2.6 times. Furthermore, 72% of CEOs say citizen trust will be critical to competitiveness in the next five years, and 61% of emerging young leaders say business models should only be pursued if they improve societal outcomes and generate profitable growth.
What Leadership Standards, Frameworks and Metrics Are Conducive to Improved Outcomes?
Successful sustainability leadership relies on systematically using ESG frameworks, standards and metrics.
In ESG standards, detailed disclosure criteria are presented, including performance measures. A standard involves public interest, independence, due process and public consultation, strengthening its basis. For companies to report on their ESG performance, targets and policies, standards are necessary to provide clear, consistent criteria and specifications. In addition, creating and leveraging consensus among stakeholders and experts requires this rigorous governance process.
Frameworks for ESG provide a broader context for information. They define the direction in which information will be collected and presented but not the actual methodology of collecting or reporting them. A framework is created based on a simpler advisory process instead of standards. Although a framework doesn’t specify performance measures, it prescribes high-level disclosures.
Successful sustainability leaders use quantitative and qualitative metrics to gauge performance over time. Quantitative metrics are numerical values tracked to convey progress in quantities, distances, time, percentages and other measurable units. Qualitative metrics convey information about a sustainability program’s characteristics, processes and initiatives.
A Curriculum That Prepares Managers to Lead in Sustainability Concerns
The University of Wisconsin-Parkside’s online MBA with a Concentration in Global Management program prepares graduates to provide leadership and successfully navigate sustainability concerns in global account management and business administrator positions. Students learn advanced sustainability leadership skills and strategy formulation in courses including Contemporary Challenges in Managing Organizations, Advanced Global Management, Creative and Innovative Management and Global Supply Chain Management. If you are interested in applying sustainability concepts in your career, this program is ideally suited to develop your abilities to contribute to sustainability strategies and initiatives.