Sustainability Leadership Making Change Happen

Part I The Executive

Part I of Sustainability Leadership: Making Change Happen

is the first of a two-part series that explores the human
capital dimension of sustainability. The series is based on
in-depth interviews with leading sustainability executives
in Europe and the Americas combined with research and
analysis conducted by consultants in the Global Sustainability
Practice of Egon Zehnder International.
Part II explores the team dimension of sustainability,
examining the competencies required for teams to address
the challenges and seize the opportunities of corporate
sustainability initiatives.

Christoph Lueneburger
Egon Zehnder International, New York
christoph.lueneburger@ezi.net
+1.212.519.6020

Richard Murray-Bruce
Egon Zehnder International, London
richard.murray-bruce@ezi.net
+44 (0)207.943.1928

Sustainability Leadership Making Change Happen

Part I The Executive

After a period of corporate inertia and resistance in many sectors, more and more
businesses are recognizing the need to engage with the issue of sustainability. Calls
to action are coming from all sides, but how should companies respond? Corporate
approaches that relied either on minimum regulatory compliance or on public relations
initiatives are now seen to lack the broader strategic and commercial relevance required
for success. What does it take to lead an organization on this journey? What does it
take to define, promote and implement comprehensive, strategic, and commercially
relevant sustainability initiatives? And what experience and competencies should CEOs
look for when appointing senior executives to lead such initiatives?
From research conducted by our Global Sustainability Practice, it is clear that the
scope of the sustainability agenda itself is viewed differently not only by competitors in
the same industry, but also by different executives within the same organization (see
sidebar Sustainability: A Working Definition). Even senior sustainability leaders have
difficulty articulating what good looks like in this role. Because of these differences,
progress can be uneven, alignment elusive, and leading an organization on a
sustainability journey can be challenging.
Our research indicates that the adoption of sustainability by organizations evolves
through three distinct phases. Each phase is framed by clear demarcation points
(although organizational initiatives can be asynchronous in evolving through these
phases); each requires different levels of organizational capability to address
sustainability-related issues and seize related opportunities; and each requires a distinct
set of competencies on the part of the sustainability leader. For senior business leaders
who select executives to lead sustainability initiatives, it is therefore crucial to understand
each of these phases and the leadership competencies they require (Figure 1).

Sustainability A Working Definition

Sustainability refers here to the generally accepted definition that encompasses three inter-related forms of
sustainability economic, environmental and social.
Economic sustainability is the ability of an organization to maintain economic profitability by generating value from
its offering of products and services. Successful organizations find a way to translate their relative competitive
advantages into economic values that deliver returns to their owners.
Environmental sustainability is the ability of an organization to ensure that its long-run economic behavior is not
undermining its own or the broader natural environment. This recognizes that natural resources have a finite capacity
either for exploitation or as sinks for pollutants.
Social sustainability is the recognition that an organization operates within a broader social context and relies on
it to prosper and survive. The social dimension of sustainability affects an organizations activities at every step of the
value chain from suppliers use of international labor to employee, customer and community engagement.
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Figure 1 Phases of Organizational Capability

Challenges and Competencies

The organization is
consciously reactive
and views
sustainability as an
unavoidable and
pervasive (though
likely arduous) mandate. Sustainability
business metrics are
inconsistent or noneconomic.

O rganizational Capability

The organization
is unconsciously
reactive and views
sustainability as
a non-issue or a
regulatory constraint.
Correspondingly,
there are no
business metrics
for sustainability.

The organization
is consciously
proactive and views
sustainability as an
imperative operational
competence.
Sustainability
business metrics are
both consistent and
economic over the
business planning
horizon.

The organization
is unconsciously
proactive and views
sustainability as an
innate core value.
Sustainability
business metrics are
both consistent and
economic over the
very long term.

P hase 1

P hase 2

P hase 3

Early

Intermediate

Advanced

E fficient

F rontier

T ime

Vernacular

Data

Systemic
Challenge

Create
Sustainability Vision
Cultivate receptiveness
Persistently build business
case and metrics

Information

Key Executive
Competencies

Change Leadership
Collaboration & Influencing

Knowledge

Translate
Vision into Action
Embed sustainability for
operational impact
Relinquish central control

Insight

Results Delivery
Commercial Orientation

Foresight

Anticipate
Future Needs
Build long-term
partnerships
Foster innovation

Strategic Orientation
Commercial Orientation

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Sustainability Leadership: Making Change Happen

In our experience, companies that make the most rapid progress on this journey do
three things well:

First, they determine the companys state of organizational readiness for change the
degree to which staff understand sustainability and are committed to achieving it.
Second, they clearly define the mandate of the lead sustainability executive

establishing their responsibilities and evolving these as key milestones are achieved
in the corporate sustainability program.

Third, they ensure that the right executive is appointed to lead at each phase of the
program selecting those who possess the right balance of competencies,

experience and personal characteristics to lead the organization through each phase.
Appointing the right sustainability executive for each phase of the program accelerates
an organizations progress towards securing lasting competitive advantage from its
sustainability programs, but requires more than seeking professionals with subjectmatter expertise. Companies that fail to select the right executive can delay or de-rail
their efforts, running the risk that their sustainability programs are not aligned with
overall corporate strategy and lack commercial relevance.

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Figure 2 Executive Competencies

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S T R A T E G ILeadership
for Sustainability
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While each phase draws upon

L
combinations of most of the six
competencies, this paper focuses on
the two key competencies necessary
for success in each phase.

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The Essential Competencies of the Lead

Sustainability Executive
Egon Zehnder International has developed
a comprehensive model of leadership that
encompasses the core competencies of senior
executives, a model based on our experience of
working with senior management teams across
industries and on more than 25,000 senior
management appraisals conducted over the
past five years. Combined with that research,
our recent executive search and management
appraisal for senior-level sustainability
professionals suggest that six competencies are
central to the success of sustainability leaders:
S T R AT E G I C
(1) change leadership, (2) Ocollaboration
and
R I E N TAT I O N
influencing, (3) strategic orientation, (4)L
commercial orientation, (5) results delivery and
(6) team leadership.

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Sustainability Leadership: Making Change Happen

Although the lead sustainability executive will need a baseline of all these
competencies, each phase of the journey tests a different combination of dominant
competencies:

In the early phase, when the organization is largely unprepared to address

sustainability, the key challenge is to make a clear and compelling case for change.
Because the organization is at best reactive to the challenges of sustainability (and
usually unaware of the opportunities), the sustainability leader must be adept
at collaborating and influencing in the course of convincing the organization to
change from unconscious to conscious reactivity. At the end of the early phase,
sustainability emerges as a powerful mandate that is pervasive throughout the
organization.
In the intermediate phase, senior leadership is on board and the task is to translate
high-level commitments into a comprehensive change program with clearly defined
initiatives and hard commercial targets. To make this happen, the lead sustainability
executive must be good at delivering results and needs strong commercial
awareness. At the end of the intermediate phase, sustainability becomes an
organization imperative that is tracked through economic, environment and social
metrics over the business planning cycle.
In the advanced phase, sustainability becomes embedded in the organizations
DNA, much like quality or financial control. It becomes a core value and the
organization is unconsciously proactive in sustainability. Now the lead
sustainability executive must be adept at anticipating and evaluating long-term
sustainability trends, spotting new opportunities and developing strategies to
re-position the organization to benefit from them. While the need for commercial
orientation continues unabated, it is now matched by strong strategic orientation.
Although there is no endpoint to the advanced phase (as organizations will
continuously raise the bar and leverage sustainability to create competitive
advantage), the lead executive is now working in an environment that views
sustainability as a strategic opportunity and gauges its progress with metrics that
reach beyond the short to medium term.

By understanding how these key executive competencies play out in each of the three
phases, companies can make far better informed decisions about precisely what they
should look for in their lead sustainability executives.

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Phase 1
Making the Case for Change
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Historically,
nearly
been
A T E G I C every company has at some point
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S T R AT E
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I E N TAT I O N
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unconsciously
reactive to sustainability: they notO Ronly were
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unaware of the threats and
opportunities resulting from
sustainability, but they were unaware of this blind spot. But then
something happens that brings it onto the senior leaderships
radar screen. The trigger can be an external event competitor
activity, impending regulatory action, market, media or non
governmental organization (NGO) scrutiny. More and more,
internal pressures, such as scarcity of a key manufacturing
O
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input,
experience, one
G N force the issue. In our
G N of the most
L
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frequent triggers
involves
a
CEO,
chairman
or division
head
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N TAT I O N
N TAT I O N
realizing that
the business is running a range of known
and
unknown sustainability risks in its core operations and that
addressing those risks requires dedicated focus and resources.

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S T R AT E G I C
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As an organization begins to engage with sustainability, the degree of organizational

readiness is, not surprisingly, low. The organization lacks a shared and consistent
understanding of what sustainability means. Some consider it to be a regulatory
constraint; others consider it to be either strategically or commercially irrelevant.
Senior executives may not fully appreciate the sustainability threats and opportunities
the business faces. Even if a company appoints a lead sustainability executive, beyond
a general sense that the company needs to act, the mandate for the newly appointed
executive can be surprisingly vague.
Under these circumstances, the paramount competencies of the sustainability leader in
this phase are:

Change Leadership: the ability to understand and overcome the barriers to adopting

sustainability and to identify, define and develop a specific set of business processes
geared to manage previously un-quantified risks and to capture new opportunities.

Collaboration and Influencing: the ability to cultivate and communicate a compelling

vision and gain buy-in from key opinion formers in the organization and the skill
to engage and partner with managers to weave sustainability into the fabric of the
organization.

Lead sustainability executives should be comfortable with ambiguity and be able to

champion sustainability in organizations that may only be starting to appreciate the
need for change or may even be actively resisting it. Self-starters with a thick skin, they
are able to question and counter strongly held views across the business. They also
need to be able to link their proposed sustainability initiatives to overall corporate

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strategy, highlighting the connections and not being afraid to call out, challenge and
bring innovative solutions to the table where there are major areas of difference. Some
organizations we looked at were willing to revise their overall corporate strategies early
in the process. Others preferred to see progress on discrete sustainability initiatives
before making more fundamental corporate strategic changes. All had some level
of strategic engagement in Phase 1 to ensure that initiatives launched in subsequent
phases were linked to the overall corporate strategy and delivered lasting and
commercially relevant change.
Recognizing and addressing major policy and regulatory issues that have the potential
to radically affect the organizations economic sustainability are critical components
of the initial phase. While fundamental changes to corporate strategy and major new
initiatives take place in subsequent phases of corporate sustainability programs, early
identification of important, but as yet ill-defined risks and opportunities is important.
The challenge can be daunting. For example, one of our interviewees, the head of
sustainability for one of the worlds largest global banks, recalls a meeting in which
another executive stopped talking in mid-sentence, pointed at him and said, I cant say
anything more as long as he is in the room.
The head of sustainability at a leading European retailer reports that this phase can
feel like kicking at the door in order to make senior managers understand the
challenges that sustainability poses to the business and recognize the need to engage
in a meaningful discussion. You are a bit like the grit in the wheel making things
uncomfortable for the senior team and helping to shake up their thinking, he says.
You have to walk a fine line between challenging senior leaders and pushing things
too far and getting rejected by the organization.
However, even the most persuasive argument for sustainability is unlikely to have
lasting impact if the lead sustainability executive is unable to collaborate with and
influence others. He or she must be able to influence different parts of the business, as
well as external partners and stakeholders, to commit to the effort. They must be able
to listen, build alliances across the business, and align leadership. Further, the role
of the lead sustainability executive is often poorly understood in other parts of the
organization. Under those circumstances, the executive has to make up in collaborative
skills for what may be a perceived lack of clout. And he or she must do so from the
beginning. Says a US manufacturing head of sustainability, You need to tell a story
that engages the general managers not eventually, but the first time around.

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Sustainability Leadership: Making Change Happen

Executives who rate well on collaboration and influencing are, in our experience,
somewhat rarer than those who score highly on change leadership. The right leader
for this phase is driven by the need to change supporting change, advocating it and
motivating others to initiate change. He or she knows how to get the support of others
and how to build enduring partnerships across organizations and geographies. Both
competencies are critical.
Although the first phase may already contain localized sustainability efforts, they will
typically be unconnected by an overarching strategy. By the end of the first phase,
however, the sustainability leader who can lead change and collaborate effectively will
have brought organizational capability from the state of unconscious reactivity to that
of conscious reactivity: the organization still lacks a comprehensive sustainability
program, but it knows this and recognizes the need to develop one.

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Where
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a concerted
to
follow
the
management
adage that what
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gets measured gets done, which includes hard financial,
environmental and social data. Sustainability initiatives
are regularly reassessed and, where appropriate, adjusted,
expanded, or curtailed. As organizational readiness and organizational capability rise
in tandem, the sustainability leader begins to hand off operational responsibility to
other areas of the business. Heads of business units, for example, adopt sustainability
metrics as an explicit part of their performance dashboards and make sustainability
part of their quarterly and annual focus.
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In the intermediate
S T R A T E G I C phase of organizational capability for
E N TAT I O N
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sustainability,
the mandate for change has been agreed upon by
L
the senior leadership team
and communicated throughout the
organization. People now view sustainability as an inevitable
thrust of the business. In terms of capability, the organization
is beginning to develop and implement programs that translate
vision into a series of discrete initiatives and tangible projects
that deliver real change.

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Phase 2
Translating Vision into Action

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At this phase of organizational readiness, the most important competencies for the
lead sustainability executive are:

Results Delivery: the ability to translate a sustainability vision into a comprehensive

program of targeted initiatives whose success can be tracked based on clear metrics,
and the ability to take corrective action if performance falls short of expectations.

Commercial Orientation: the ability to focus and prioritize efforts that generate
the most value for the organization over the business planning cycle, and the
willingness to abandon initiatives that prove not to address sustainability issues.

To ensure that the corporate sustainability action plan addresses all of the major
issues facing the business, the executive should be able to fully appreciate how issues
as disparate as carbon pricing, resource limitations, and the social components
of sustainability affect the company. At all times, however, the lead sustainability
executive must be able to narrate the commercial relevance of these issues with a firm
focus on risk mitigation and value creation. To do so, he or she must be able to engage
and lead teams both those who are dedicated and those who are disparate and often
virtual to tackle complex issues.

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Successful sustainability executives in this phase have strong commercial instincts

they understand best practices and know how to use them to their advantage. As a
Chief Sustainability Officer of a consumer product company remarked: Half of what
I do went under names like Lean Manufacturing and Just-In-Time a few years ago; its
using less stuff and using it more effectively. And yet much change in this phase does
not come easily: supply chains are restructured and product ingredients eliminated.
Often, these efforts are burdened with significant pressures from PR and marketing
teams to promote eye-catching initiatives before the overall sustainability program has
gained traction and momentum. A Head of Sustainability at a multinational financial
institution pointedly remarked that: Its difficult to reign in marketing green is cool
and they know it. But so much of what we need to do is less about being glossy than
about delivering on goals we have committed to. These may not be glamorous, but they
are hard and measurable. Its a business, not a Broadway show!
We have found that executives who rate highly on results and commercial orientation
are consistently connecting market need to competitive advantage. They set aggressive
goals that have real economic impact, and track their progress against plan as they
strive to reach them. These executives are motivated by metrics, and they will drive
hard to deliver.
By the end of this phase, the organization will be conscious of sustainability and no
longer merely reactive to its implications; it will proactively leverage sustainability to
manage risks and create value.

From Functional Specialist to Business Partner

A Comparative Perspective
In analyzing the challenges of sustainability leadership we relied not only on the insights of leading sustainability
executives today. We also analyzed our proprietary database, assessing the evolution of comparable new specialist
roles to predict the likely set of competencies that sustainability leaders will need to become true business partners.
For example, the role of Chief Information Officer (CIO) has evolved over the past 20 years from one defined by
technical mastery to a business leadership position. Successful CIOs who have taken this journey have combined
their technical skill with commercial acumen and strategic awareness to move from being functional specialists
to business partners. Based on our evaluation of 145 CIOs from 28 companies in 9 industry groups (benchmarked
to a control group of 146 CEOs and 110 COOs), the biggest differences between good and outstanding CIOs lies
in the superior strength of their change leadership and results delivery. In fact, a high level of technology expertise
was not a significant causal dimension of the profile of outstanding CIOs.

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Expanding Boundaries

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While much focus will fall on internal issues that can have
a swift short-term impact, the sustainability leader should also
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be able to identify longer-term issues and opportunities that
M E RCIAL
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require a more sophisticated level of engagement with external
stakeholders issues and opportunities that may have a more
fundamental impact on business strategy and operations. The
lead sustainability executive needs to bring strategic orientation and maintain and
extend the commercial orientation of the previous phase:
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In the third phase, sustainability has become a routine

component of business dialogues at all operational levels.
Strategic initiatives and the performance metrics framing them
reflect social and environmental as well as financial goals. At
this point, the organization has ceased to think of sustainability
as an externality, but embraces it as a core value; the term
stands for the sustainability of the business itself.

Strategic Orientation: the ability to develop multi-business sustainability strategies

yielding high impact in complex corporate and competitive environments.

Commercial Orientation: the ability to focus and prioritize efforts that generate
the most value for the organization over the medium to very long-term, and the
willingness to abandon initiatives that prove not to address sustainability issues.

Sustainability leaders in this phase are inquisitive and reflective, asking tough
questions that probe the core purpose of the organization. What are the ways in which
we can run our business without fear of environmental degradation or social inequity?
How can we anticipate, influence and benefit from regulatory changes that relate
to sustainability? How can we leverage those ways to create differentiation and
competitive advantage in our markets? The task for this executive is one of continually
enhancing organizational capability in sustainability. To do so, he or she will need
exceptional strategic orientation in addition to resolute competence in commercial
orientation much like that in Phase 2. It is this combination that allows sustainability
leaders in Phase 3 to synthesize multiple and frequently conflicting trends in
developing a coherent long-term sustainability strategy, managing trade-offs, and
ensuring that the overall corporate strategy is aligned with key sustainability principles.
Thus the leader evolves into a futurist, pursuing long-term investments and
partnerships that strengthen and transform organizational assets ranging from
internal capabilities and target segments to supply chains and distribution channels.
He or she must be cognizant of new opportunities arising in the course of tackling

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sustainability issues. For example, one client company we interviewed was struggling
to limit the impact of its waste in a traditionally asset-light industry. When their lead
sustainability executive reviewed the challenge through a strategic lens, the issue
appeared in a fundamentally new way. The lead sustainability executive helped
develop a new co-generation plant that used the waste as a fuel, thereby saving energy
costs and reducing carbon emissions. Another European retail client forged new links
with a charity where consumers could recycle their clothes in return for vouchers to
buy new clothes in stores. As is typical of Phase 3, the leaders of these efforts thought
intensely about overcoming challenges for business, but no less intensely about
creating businesses for challenges.
Such successes are a reminder that strategic orientation encompasses far more than an
abstract intellectual ability. It also means having the creativity to develop new approaches
to sustainability challenges and the courage to question the status quo. For example,
the lead sustainability executive might challenge the way the business typically looks
at investments, demonstrating how hurdle rates might be adjusted to take account of
initiatives that would generate a significant return, but over a longer time period.
As new directions become visible on the business planning horizon, the lead sustainability
executive must also be able to ensure that the appropriate changes are implemented at the
operational level. At the same time, the goal is to disseminate responsibility for generating
sustainability improvement from the corporate level to the business level by embedding
best practices throughout the organization. As the sustainability leader for one of the
worlds leading computer manufacturers succinctly puts it: My job is to disassemble
my team and spread it across a bunch of P&Ls. Once initiatives are under way, the
sustainability leader can become a key node for information exchange, facilitating
connections across international business units and functional areas, as well as forging
opportune and sometimes non-obvious external relationships.
Now able to leverage sustainability as a corporate value embedded in the organizational
DNA, the lead sustainability executive can focus more sharply on opportunities to change
the game in the companys industry, seeking out new ways to compete. One seasoned
CSO puts it this way: I dont worry about our earnings next quarter even if its
tempting. I worry about the new capabilities well need to show earnings when I retire.
Executives capable of developing long-term plans that shape corporate strategy can
move the organization to being unconsciously proactive with respect to sustainability.
Sustainability is symbiotically embedded in the operational processes and the longterm strategy of the business.

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You Are Here

An often repeated proverb holds that its the journey that counts, not the destination.
Not with sustainability. What counts here is very much the destination - the point at
which the organization can routinely and reliably extract the maximum value from its
sustainability efforts. But to get there, Boards of Directors and CEOs must first know
where they are on this journey. They can do so by asking some fundamental questions:

What does sustainability mean to our organization?

If we are ready to pursue sustainability, what goals and metrics should we adopt?

What competencies do we need to reach these goals?

The answers will provide a compass for the journey ahead and help to select the right
executive to make change happen.

Sustainability Teamwork
The Other Half of the Story
Sustainability Leadership Making Change Happen
Part II The Team

Lead sustainability executives cannot go it alone. They need a strong team with the right
competencies for success around them. As with the lead sustainability executive, the
relative importance of these team competencies shifts as an organization moves through
the three phases of engaging with the sustainability agenda. How these competencies
change and the implications for organizations seeking to assemble the right sustainability
talent is the subject of Part II of this series.

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Amsterdam
Athens
Atlanta
Bangalore
Barcelona
Beijing
Berlin
Bogota
Boston
Brussels
Budapest
Buenos Aires
Calgary
Chicago
Copenhagen
Dallas
Dubai
Dusseldorf
Frankfurt
Geneva
Hamburg
Helsinki
Hong Kong
Houston
Istanbul
Jakarta
Jeddah
Kuala Lumpur
Lisbon
London
Los Angeles
Luxembourg

Lyon
Madrid
Melbourne
Mexico
Miami
Milan
Montreal
Moscow
Mumbai
Munich
New Delhi
New York
Palo Alto
Paris
Prague
Rio de Janeiro
Rome
San Francisco
Santiago
Sao Paulo
Seoul
Shanghai
Singapore
Stuttgart
Sydney
Tel Aviv
Tokyo
Toronto
Vienna
Warsaw
Zurich

Egon Zehnder International is the worlds leading privately

owned executive search firm with some 380 consultants,
working in 63 offices in 37 countries world-wide. The firm
specializes in senior level executive search, board consulting
and director search, management appraisals, and talent
management. Through our work with a wide range of leading
companies, we are fortunate to be able to draw together
prominent senior leaders for regular discussions on topics
relating to sustainability and corporate citizenship.

2009 Egon Zehnder International

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