What CEOS really think about sustainability

Last week, I attended a meeting of the Cambridge Programme for Sustainability Leadership (CPSL) Advisory Board, a sister department of Cambridge Judge Business School (CJBS).

At the meeting, attended by very senior leaders of well-known companies, including resource companies, banks, and consumer goods, I was struck how far the debate on sustainability and social responsibility has moved beyond the old PR or CSR lip service. Instead, participants took it as given that their companies had an increasing responsibility to consider and take responsibility for the effects of their actions on society.

The discussion among these business leaders ranged over issues such as how companies can measure the effects of their actions that might be felt far in the future, or far away, and how companies could counteract the fact that governments are currently backtracking, shying away from the real measures that need to be taken to reduce environmental degradation (such as carbon emissions pricing with bite).

It is ironic to see how governments seem to believe that the public is incapable of understanding the long-term threat that we are under – they therefore resort to short-sighted policies in order to capture the next vote. In contrast, 

Of course, I have no illusions that these far-sighted companies are representative. Four days after the CPSL Advisory Board meeting, I had a discussion with a senior manager of a major investment bank. He told me about the “responsible investment strategy” of his organisation. A CEO-appointed (but relatively junior) person appeared before the senior management committee to present the sustainability strategy, which consisted (bluntly spoken) of, “Let’s go through all our investments, see which ones we can claim have an environmental streak, and then present these as a strategy”. As soon as the presenter had left the room, the group of managers snickered over how useless this distraction of “sustainability” was. The manager I spoke to expressed discomfort about the discrepancy between external claims and what the organisation really prioritised.

Banks that continue to blatantly ignore their responsibility for the effects they have on society do risk their license to operate; for example, HSBC is “on probation” in the US. On the other hand, financial markets are on the verge of repeating the 2007 bubble: central banks have pumped so much cheap money into the world economy that investors are again engaging in junk and worse-than-junk investments in search of returns, running with open eyes into a looming “correction,” knowing that many of the investees won’t be able to repay in a few years. This is caused not only by the much talked about recklessness that has cost some banks their good reputation, but also by a feeling of helplessness in a system in which some economies are now addicted to the cheap money, and which does not possess the tools to evaluate anything other than short-term returns.

Companies need to embrace societal responsibility because markets will demand it (if not today, as is the case in some markets already, then in the future). But they cannot do this alone; governments need to change the rules to enforce consideration of societal side effects (and they are currently failing to do so).

Academia also needs to help, by developing the new evaluation concepts tools necessary to estimate societal effects and long-term results. Which comes right back to our collaboration with CPSL. The CPSL is a sister department of the business school that works with companies on their long-term success in a threatened and changing environment. Incorporating sustainability in the heart of business strategy will become ever more important in the coming generation, which is why CJBS and CPSL are stepping up their joint working in research, with two projects under way and more to come, and in the development of courses (such as on responsible investment, and a module on bringing sustainability into the business strategy in the form of innovation opportunities), with more to come.