11 October 2010

HBR Case Study; Should Sustainability Have a Seat in the C-Suite?

Harvard Business Review has the best case studies, but then I guess we should expect that. I know that I read their case studies, and say "Well, of course" in answer to their question. But like most really good questions, the answers are never "yes" or "no". There is a real pleasure in thinking through the problem.

This month it was no different.  Their question was: Should Sustainability Have a Seat in the C-Suite? My gut reaction is "Well, yeah, how else are they going to be, and be seen to be serious about this?" But a close reading of the case, a mythical computer and electronics company called Narinex, made me rethink my automatic response. They are losing bids, not all the time, and not all the big ones, but enough to make them look closer. And one of the key differentiators is their competitor's (in the situation highlighted) sustainability record. At least, it seems to be their record.

Closer reading shows that it is not the sustainability record, but in part the presentation of that record through the appointed CSO (Chief Sustainability Officer) at one of their competitors.

I won't rehash the case here, you can read it at the link above. But I do want to mention two of the comments submitted by readers.

Elaine Cohen, as usual, is clear in her argument - "I believe the question at this point is not whether to hire a CSO but what is the sustainability reality for the Narinex company. The focus on sustainability is not going away, and is now a minimum expectation of businesses." She then goes on to recommend a Sustainability Mapping Study, with result provided to leadership for decision making.

She ends by saying "Sooner or later, in my experience, if a company is serious about sustainability, a CSO is a necessary asset. However, in the first stages, moving forward step by step may require broader expertise that one CSO can deliver and it might be better to establish some initial good practice through engaging the management team in their own functional areas, but only if there is someone in the business who is prepared to champion this as a short-medium term assignment."

The other comment that I really liked was from Erik Thomsen, who approached the problem from a slightly different point of view. Erik focuses on the availability of information for clear future decision making. He says "This is because the financial metrics traditionally used in the C-Suite are inherently backward looking and fail to capture critical environmental and social factors that are the drivers of medium to long-term financial performance. "

He's right. The information provided, and modeling performed remains based on well worn paradigms, one of which is that a zero price input today will remain a zero price input in the future. The pricing of externalities, if not in fact then certainly in projections, is critical to corporate success.

While I favour hiring a CSO, Erik has a different view: "What’s more, hiring a Chief Sustainability Officer implies that the rest of the C-Suite is too busy to be concerned with sustainability. This would implicitly de-position sustainability, putting it into a box other members of the C-Suite don’t have to think about."

He finished by saying "Finally, addressing the VP of Sales’ concerns -- who is going to generate more buzz, a Chief Sustainability Officer talking about issues that could be handled by someone in marketing and communications? Or the CFO, COO and CEO talking about the strategic business decisions that will ensure the company’s future profitability in an environmentally and socially sustainable way?"

Both Erik and Elaine are right, even through their suggestions in the end are different, I think they are both right. I think they should hire a CSO. Yet Erik makes the point well, who better than the entire leadership team to make the point that sustainability has become part of the DNA of the company?

It will be interesting to see how this evolves.

Real Pink Falmingos - near Alres, France


  1. FWIW, the following was posted as a comment to the HBR blog:

    Celesa Horvath's assertion, below, that " 'sustainability' is at once well-defined ... and poorly understood," is correct, except that "well-defined," in this instance, means "too narrowly defined."

    Consider the following from an October 5th NY Times article, titled "At Flagging Tribune, Tales of a Bankrupt Culture", about Sam Zell's takeover of one of the US's major media empires: "Mr. Zell has acknowledged that the deal has not turned out how he hoped. But noting a recent upturn in results, he said through a spokesman, 'Tribune has made significant strides in becoming a current, competitive and _sustainable_ media company.' "

    Whatever Mr. Zell's iniquities regarding Tribune Company, his concept of "sustainability" is what is perceived by at least 9-out-of-10 C-suites. Sustainability as strictly "bein' green", "social responsibility", "the triple bottom line", etc. is and will be pursued by but a tiny corporate cohort indeed, a fair portion of which will just be doing "greenwashing."

    How about considering "sustainability" as debated by the folks at Narinex, above, in a broader "enterprise sustainability" context, comprised of six principles:

    * Sustainable Financial Growth - Using Sustainable Growth Analysis, financial and operating leverage, equity accumulation, and asset utilization are managed to project revenue growth objectives;

    * Enterprise Economic Sustainability - Growth impacts of each product/service market and of the economy as a whole are understood;

    * Sustainable Competitive Advantage - Distinctive competencies are cultivated and resources combined in hard-to-duplicate ways to create uniquely value-added products/services;

    * Logistic 'Sustainment' (a military term) - Products/services are deployed in ways that maintain adequate capacity, speedy time-to-market, & efficient supply chain use.

    * Sustainable Stewardship ... exercised over the complete life-cycle and impact of every product/service;

    * Sustainable Business Philosophy - Mission defined in terms of an (Aristotelian) "golden mean" between "excess" and "deficit."

    Just a suggestion that might give sustainability a better chance of surviving in the C-suite.

    Pete Haynsworth

  2. Pete,

    Very interesting comments. I like the 6 principles. I can see a wonderful structure of consideration of sustainability from a number of perspectives - and yes, as contributing to the C-suite's common language and commitment to sustainability.

  3. I too agree that a broader enterprise-wide perspective of sustainability is required; much of my work with corporations emphasizes adoption of a holistic sustainability vision that integrates economic sustainability and value creation, governance, ethics, leadership, and innovation, as well as the usual environmental and social aspects.

    Thanks for adding more depth to the conversation arising out of the HBR case study!

    Celesa Horvath