Sustainable Leadership

There is a considerable body of evidence that shows that sustainable leadership practices are more likely to enhance business performance over the long-term than the traditional approach that puts the interests of shareholders first and focuses primarily on short-term financial metrics.[1]  While all leaders should have a vision and desire to inspire their followers to take collective action to make it happen, sustainability leaders can be distinguished as people who inspire and support action to identify and develop innovative sustainable solutions, business models and practices  that will lead to a better world.  Sustainable leadership focuses on bringing about dramatic changes and requires taking a long-term perspective in making decisions; fostering systemic innovation aimed at increasing customer value; developing a skilled, loyal and highly engaged workforce; offering quality products, services and solutions; engaging in ethical behavior and decision making and establishing ethical values and standards throughout the organization. 

In order to be effective, sustainability leaders must develop and practice several important habits including a systemic, interdisciplinary understanding; emotional intelligence and a caring attitude; values orientation that shapes culture; a strong vision for making a difference; an inclusive style that engenders trust; a willingness to innovate and be radical; and a long-term perspective on impacts.  In addition, they must implement a number of initiatives to establish and maintain the foundation for sustainability throughout their organizations including training and staff development programs, proactively striving for amicable labor relations, development of strategies for staff retention, shifting compensation programs toward metrics that valued contributions to customer loyalty and to innovation, promoting environmental and social responsibility, initiating communications with multiple stakeholders and transparently taking into account and balancing their interests, and developing and embedding a shared vision for the goals of the business.

Cambridge Sustainability Leadership Model

After surveying the theories of leadership and observing specific practices of leadership relating to sustainability, Visser and Courtice suggested that sustainability leaders could be distinguished by certain traits, styles, skills and knowledge.[2]  The traits of a sustainability leader, which Visser and Courtice described as distinguishing attributes, qualities or personal characteristics which are generally seen as being enduring, included caring/morally-driven behavior, systematic/holistic thinking, enquiring open-mindedness, self-awareness and empathy and visionary courage.  They also argued that it was possible to identify certain core elements of an effective sustainability leadership style: inclusiveness, visionary, creative, altruistic and radical (i.e., taking risks, acting like a revolutionary and challenging the status quo).  In addition, Visser and Courtice counseled that leaders needed a variety of specialized skills in order to effectively direct their businesses and followers in a sustainable economy including the ability to manage complexity, communicate vision, exercise judgment, challenge and innovate and think long term.  Finally, they noted that prospective sustainability leaders needed to have sufficient knowledge about sustainability in order to translate it into successful business strategies and effectively communicate on issues of sustainability to their followers and the stakeholders of their companies including knowledge in the following areas: global challenges and dilemmas, interdisciplinary connectedness, change dynamics and options, organizational influences and impacts and diverse stakeholder views.[3] 

Visser and Courtice found that the biggest challenge for sustainability leaders was going beyond saying the right words about sustainability to actually “walking the talk” by taking the actions necessary to execute on the sustainability plans of their organizations.  Among the problems that must be overcome are entrenched values and practices within the organization that would be upset by the sustainability strategies, and progress by sustainability leaders will depend on them taking certain internal actions such as providing managers and employees with a compelling vision and strategic goals, creating incentives for integrating sustainability into day-to-day practices, empowering people throughout the organization and providing opportunities to learn about sustainability and its place in the business context.  At the same time, sustainability leaders must also look outward and take external actions such as incorporating sustainability principles into customer-oriented activities such as sales and marketing, involving their organizations in cross-sector partnerships and implementing stakeholder engagement and transparent reporting programs.[4]

Avery and Bergsteiner’s Sustainable Leadership Practices

Avery and Bergsteiner argued that the best way to understand sustainable leadership practices was to contrast them directly with their polar opposite: “the typical shareholder-first approach, which business schools, management journals, the media, and many practitioners continue to promote”.[5]  During the course of several studies involving organizations from all around the world, they identified and distinguished two diametrically opposed sets of leadership practices, principles and/or attitudes that formed self-reinforcing systems and which they referred to as the “sustainable ‘honeybee’ leadership approach” and the “shareholder-first or ‘locust’ approach”.[6]  Avery and Bergsteiner arranged the practices in the form of a pyramid with ascending levels in order to provide guidance for intervention: foundational practices at the bottom, higher-level practices above them and key performance drivers at the third level.  The goal for sustainability leaders was to apply the leadership practices to achieve five important performance outcomes that Avery and Bergsteiner believed were associated with a sustainable business: integrity of brand and reputation; enhanced customer satisfaction. solid operational finances (all firms have to survive financially including in the short term); long-term shareholder value; and long-term value for multiple stakeholders.[7]

The fourteen “foundation practices” placed at the lowest level of the pyramid could be introduced at any time that the leadership of the organization decided and included a number of different initiatives such as training and staff development programs, proactively striving for amicable labor relations, development of strategies for staff retention, shifting compensation programs toward metrics that valued contributions to customer loyalty and to innovation, promoting environmental and social responsibility, initiating communications with multiple stakeholders and transparently taking into account and balancing their interests, and developing and embedding a share vision for the goals of the business.[8]

Once the foundational practices have been put into place, leaders could begin to introduce one or more of six higher-level practices placed at the second level of the pyramid: consensual and devolved decision making; self-management; extensive and empowered teams; an enabling and widely-shared culture; sharing and retention of knowledge throughout the organization and high levels of trust through relationships and goodwill.  These practices generally involved difficult and time-consuming changes to many key aspects of how business is done on a day-to-day basis.[9]  Notably, effective implementation of the higher-level practices required that related foundational practices already be embedded into the operations and culture of the firm.  For example, employees cannot reasonably be expected to become more self-managing unless they have received adequate training and career development and a have a clear sense of the vision for the firm that can be referenced when making decisions during the course of carrying out their job responsibilities and interacting with outside stakeholders such as customers and community groups.

The third level of the pyramid included three key performance drivers: strategic, systemic innovation evident at all levels in the organization; staff engagement leading emotional commitment; and quality embedded in the organizational culture rather than simply as a matter of control.  According to Avery and Bergsteiner, these elements “essentially provide what end-customers experience and so drive organizational performance”.[10]  Avery and Bergsteiner pointed out that each of the key performance drivers depended on elements lower in the pyramid.  For example, they referred to research showing that enhancement of quality occurred when organizations had a team orientation, skilled and empowered employees, and a culture that supported knowledge sharing and the development and maintenance of trust.[11]

Ethical Leadership

An ethics-based organizational culture is essential for a sustainable business; however, surveys have repeatedly found that the “tone at the top”, the actions and behaviors of organizational leaders, is possibly the greatest influencer of organizational ethics.  Everyone throughout the organization, managers and employees, follow the actions of the chief executive officer (“CEO”) and quickly hear of ethical lapses.  As such, it is essential for the CEO and the other members of his or her executive team to make a public commitment to ethical behavior and decision making and proactively communicate with others in the organization on ways in which they can and should act to further the organization’s ethical values and standards.  In addition, organizational leaders should create and rigorously administer evaluation and reward systems that take into account ethical goals and standards when decisions are made regarding compensation and promotion.  At the same time, codes of ethics should be vigorously enforced and it should be clear to everyone in the organization that failure to act in an ethical manner will lead to swift and severe disciplinary action.[12]  Setting the right tone means not only visible positive actions such as supporting local charities but also consciously avoiding actions and behaviors that send the wrong message such as ostentatious use of company airplanes, if there are any; expensive “retreats” for members of the executive team; gaudy refurbishing of the personal offices of executives; excessively large severance packages for executives; and spending lavish amounts of company funds on entertainment and recreation.[13] 

While direct responsibility for the “tone at the top” lies with the CEOs and others on the front lines of the company’s daily business operations, the board of directors also has a fiduciary and ethical duty to the shareholders and other stakeholders of the company to be mindful of actions and transactions that may be perceived as being ethically unsound.  In fact, to the extent that one of the traditional, albeit arguably narrow, duties of the board is to protect and enhance shareholder value, knowingly countenancing acts and contractual relationships with officers that reflect poorly on the company’s reputation may rightly be construed as a fiduciary failure on the part of directors.  For example, shareholders, employees and other stakeholders might reasonably look askance on directors who have approved gaudy severance packages for CEOs who oversaw extended periods of poor performance and who appear to sit idly by as the media releases embarrassing reports of CEO expenses.

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This article is an excerpt from the author’s forthcoming book on Sustainability Management, which will be published by Routledge in late 2020.  For further information, visit the following page on the author’s Sustainable Entrepreneurship Project website: https://alangutterman.com/topics/governance-management/

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About the Author

This article was written by Alan S. Gutterman, whose prolific output of practical guidance and tools for legal and financial professionals, managers, entrepreneurs and investors has made him one of the best-selling individual authors in the global legal publishing marketplace.  His cornerstone work, Business Transactions Solution, is an online-only product available and featured on Thomson Reuters’ Westlaw, the world’s largest legal content platform, which includes almost 200 book-length modules covering the entire lifecycle of a business.  Alan has also authored or edited over 90 books on sustainable entrepreneurship, leadership and management, business law and transactions, international law and business and technology management for a number of publishers including Thomson Reuters, Practical Law, Kluwer, Aspatore, Oxford, Quorum, ABA Press, Aspen, Sweet & Maxwell, Euromoney, Business Expert Press, Harvard Business Publishing, CCH and BNA.  Alan is currently a partner of GCA Law Partners LLP in Mountain View CA (www.gcalaw.com) and has extensive experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions, strategic business alliances, technology transfers and intellectual property, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company.  He has been an adjunct faculty member at several colleges and universities, including Berkeley Law, Golden Gate University, Hastings College of Law, Santa Clara University and the University of San Francisco, teaching classes on corporate finance, venture capital, corporate governance, Japanese business law and law and economic development.  He has also launched and oversees projects relating to sustainable entrepreneurship and ageism.  He received his A.B., M.B.A., and J.D. from the University of California at Berkeley, a D.B.A. from Golden Gate University, and a Ph. D. from the University of Cambridge.  For more information about Alan and his activities, and the services he provides through GCA Law Partners LLP, please contact him directly at alangutterman@gmail.com, follow him on LinkedIn (https://www.linkedin.com/in/alangutterman/) and visit his website at alangutterman.com.

About the Project

The Sustainable Entrepreneurship Project (www.seproject.org) was launched by Alan Gutterman to teach and support individuals and companies, both startups and mature firms, seeking to create and build sustainable businesses based on purpose, innovation, shared value and respect for people and planet.  The Project is a California nonprofit public benefit corporation with tax exempt status under section 501(c)(3) of the Internal Revenue Code dedicated to furthering and promoting sustainable entrepreneurship through education and awareness and supporting entrepreneurs in their efforts to launch and scale innovative sustainable enterprises that will have a material positive environmental or social impact on society as a whole. 

Copyright Matters and Permitted Uses of Work

Copyright © 2020 by Alan S. Gutterman.  All the rights of a copyright owner in this Work are reserved and retained by Alan S. Gutterman; however, the copyright owner grants the public the non-exclusive right to copy, distribute, or display the Work under a Creative Commons Attribution-NonCommercial-ShareAlike (CC BY-NC-SA) 4.0 License, as more fully described at http://creativecommons.org/licenses/by-nc-sa/4.0/legalcode.

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[1] G. Avery and H. Bergsteiner, “Sustainable leadership practices for enhancing business resilience and performance”, Strategy and Leadership, 39(3) (2011), 5, 11 (citing S. Ghoshal, “Bad management theories are destroying good management practices”, Academy of Management Learning & Education, 4(1) (2005), 75).

[2] W. Visser and P. Courtice, Sustainability Leadership: Linking Theory and Practice (Cambridge UK, University of Cambridge Institute for Sustainability Leadership, 2011), 3-4.  See also W. Visser, “The 7 Habits of Effective Sustainability Leaders”, CSR International Inspiration Series, No. 12 (2013).

[3] W. Visser and P. Courtice, Sustainability Leadership: Linking Theory and Practice (Cambridge UK, University of Cambridge Institute for Sustainability Leadership, 2011), 5-16.

[4] Id. at 16-21.

[5] G. Avery and H. Bergsteiner, “Sustainable leadership practices for enhancing business resilience and performance”, Strategy and Leadership, 39(3) (2011), 5, 6.

[6] Id. at 7.

[7] Id. at 5, 8-9.

[8] Id.

[9] Id. at 7.

[10] Id. at 7 and 9.

[11] See e.g. C. Lakshman, “A theory of leadership for quality: lessons from TQM for leadership theory”, Total Quality Management, 17(1) (2006), 41; and J. Tarı´ and V. Sabater, “Human aspects in a quality management context and their effects on performance”, International Journal of Human Resource Management, 17(3) (2006), 484.

[12] R. Daft and D. Marcic, Understanding Management (5^th Edition) (Mason, OH: South-Western Publishing Co., 2006), 141.

[13] M. Kelly, J. McGowen and C. Williams, BUSN (Independence, KY: South-Western Publishing Company, 2014), 56.