The 2020s desperately need effective business leaders, creating a more sustainable inclusive future. CHARM summarises the top skills that I think leaders need to be effective. I don’t mean just being charming – though something between persuasive and popular is not bad. I mean that an effective leader needs to excel in:
- CH – navigating Change
- A – setting Ambitious future-fit goals
- R – with appropriate appetite for Risk
- M – while working on Mindsets
CH is for navigating change
Leaders need to navigate turbulence, with eyes on the short, medium and long term all at once. How they respond to crises such as the Covid-19 pandemic is important; some have responded with more integrity and innovation than others, pivoting factories or apps for public good versus simply cancelling orders from suppliers who had already purchased materials. But navigating change well is not just about passive response to, or preparation for, events. Effective leaders constantly refresh their understanding of how change happens and of the agency of their business in shaping change, including their role in networks, in influencing policy, informing consumers, and setting expectations. As Forum for the Future’s CEO has argued in a letter to Sustainability Leaders, the decade of delivery will not live up to expectations unless they are skilled in understanding patterns, networks, complexity, resisting forces, and agency. An example I like is that when BP committed to net zero, it also left 3 trade associations, shifting its weight as an actor in change.
A is for ambitious future-fit goals
The progress of inclusive and sustainable business has to date been incremental. How can we do better on ambition? How can we benchmark performance and then outperform others? The Paris Agreement to combat climate change helped break through that mindset amongst governments, getting agreement on an ambitious aim, then progressively reviewing how to get there – the ‘ratchet’ tactic for achieving ambition. The same must apply to business leaders.
A vision that is ‘ambitious’ should mean truly future-fit – aligned with a future of net zero carbon and no poverty. If leaders first set as their vision, then they will have to ask what can we do, what is enough and what is the gap we must bridge? For example, a commitment to support smallholder suppliers to increase earnings is incremental. A commitment to eradicate poverty in supply-sheds, working on living income, diversification and with partners might take more years, but is future-fit.
R is for risk appetite
Leading a company into a sustainable inclusive future is not risk free. Quite the opposite. It will only be achievable if leaders embrace the innovation gap. “If we know now exactly how we’re going to achieve a goal that we set for 2030, it won’t be ambitious enough.” So said a leader at beverage company Diageo to my colleague James, as he reflected in his blog sharing lessons from Diageo’s recent new sustainability strategy.
It’s too easy to slip into thinking that risk strategy is all about minimisation and mitigation. But the first step is recognising the appetite for risk, and then decide how to manage risk and ensure staff know that taking risks is OK.
M is for mindset
I’m all in favour of ambitious business commitments. And even more adamant that commitments are nothing if not backed up by action. So what businesses do and say really matters. But how we think and what we all assume matters too, and ultimately have huge impact on how much change is possible. Mindsets tend to reflect the narratives, assumptions, and social norms that we all hold about how the world works, and what is relevant or irrelevant in understanding it.
It is often easier to spot competing narratives issue by issue. Is tax something to avoid? Or is tax payment something to be proud of? I think assumptions are changing on that. Is unpaid housework drudgery to minimise or something that is of high value to recognise? My former colleagues at Oxfam are working hard to get it recognised and valued. Is investment in labour rights, producer organisation, and transparency a way to minimise risk of harm or reputational damage, or a way to build better supply chains? Is carbon reduction a necessity to keep up with changing times, or an opportunity to create business value in entirely new ways?
Our recent review of the future of sustainability as we emerge from Covid-19 identified four different and competing trajectories out of Covid-19, all with contrasting mindsets: ‘There is not enough to go around so we must compete and retreat’; or ‘technology will solve our problems if we worry less about privacy’; or ‘there is no new normal so flexibility and opportunism rule’; or ‘yes we can seize this moment to transform the system and regenerate our societies and ecosystems.’ These represent competing mindsets about the future of capitalism. One of the fundamental distinctions is about profit: is profit the purpose to which all business operations defer, or is profit the means for businesses and companies to create social value?
Effective leaders are aware of mindsets and assumptions – of their own and of others. This awareness makes it much easier to understand blockages and opposition, and to shape long term change. Effective leaders will recognise, challenge them, and contribute to reshaping them.