3 Unexpected Ways CEOs Can Do More to Address Sustainability in 2023
For much of the last five years sustainability has been a golden goose for CEOs. In the investment world sustainable funds - and the companies those funds invested in - outperformed their conventional peers. In the consumer sphere, customers flocked to sustainable brands and to climate protests with equal enthusiasm. And in talent wars, the most exceptional employees hopped jobs in search of firms that put purpose ahead of - or at least alongside – profit.
However, in the past eighteen months, the pendulum has swung. Sustainable investment funds – in part due to surging energy prices – underperformed, and sustainability became an unlikely political football. Meanwhile, some US Republican lawmakers criticised woke ideology and sustainable investing. With increasingly vocal activists at the other extreme, the debate has appeared to become more polarised than balanced.
Against this backdrop, CEOs face challenging choices. If they warmly embrace sustainability, they risk alienating a portion of their employees and customers. If they step away, the voices of dissent could be even louder. So, what are the unexpected ways CEOs can do more to address sustainability in 2023?
Get on with it
The first unexpected option is to simply “get on with it”. If sustainability is part of your business strategy, simply keep doing what you are doing and tone down the most overt marketing components. While it’s tempting to show your organisation’s commitment to sustainability through public displays of support – much like the act of adding a rainbow to a corporate logo for Pride Month or assembling a diverse mix of employees for a photo shoot – these activities are often called out for “greenwashing” and “virtue-signalling.”
By toning things down and focusing on what you are doing, rather than what you are saying, your sustainability strategy will likely become more authentic – even if your Instagram “likes” decline. In an age where CEOs are frequently depicted as “always doing”, whether it’s 5am workouts or ambitious corporate restructurings, it takes a conscious effort to buck the trend, take the unexpected option, and to quietly “get on with it”.
Second, as I argue in my new book Sustainable Investing in Practice, the creation of “win-wins” does more to advance sustainability than the majority of ideological initiatives. Because most people are self-interested (to a greater or lesser degree), identifying opportunities that benefit people, planet, and profit simultaneously nearly always generate greater support than those that lack a commercial edge.
There are countless examples from the business world to inspire CEOs. Some of my favourites include Unilever’s refusal to supply generic soap to UNICEF but its willingness to donate large volumes of its best-selling Lifebuoy soap product. This not only generated incredible health and social benefits for impoverished communities but also cemented Lifebuoy as the go-to soap brand in emerging markets.
Another, excellent “win-win” is the “right turn rule” implemented by logistics behemoth UPS. By only turning right (in countries with left-hand drive vehicles) UPS’s trucks rarely turn against the flow of traffic. This leads to faster delivery times, less engine idling, and, according to some estimates, savings equivalent to millions of litres of gasoline and hundreds of thousands of tons of carbon dioxide. UPS’s efforts highlight a broader opportunity – waste. Every CEO has a waste reduction opportunity, from electricity, to manufacturing by-products, to packaging. Cutting waste is inherently margin accretive and nearly always simultaneously positive for sustainability. In a politically polarized environment, looking for “win-wins” is an unexpected opportunity.
What people say and do are different.
Thirdly, CEOs can seize an unexpected opportunity and be more nuanced in their understanding of customer attitudes to sustainability. Repeated consumer and investment studies find that large majorities of the population – particularly younger generations – are prepared to pay more for sustainable products or would like to invest sustainably. However, the follow-through of these altruistic declarations is often muted. Certain academic studies find that, when it comes to sustainable topics, the gap between those who “say” and “do” can be as large as three-fold. Understanding this nuance is a critical opportunity for CEOs.
When seeking to understand their customers, CEOs also need to be mindful of succumbing to “linear bias.” For example, when reviewing consumer sustainability preference data, let’s say on a zero-to-five scale, it is tempting to think that “fives” are more likely to act sustainably then “fours” and that “fours” are proportionately more likely to buy than “threes.” The reality is consumer actual consumer behaviour is non-linear and purchasing choices are near identical, except in the “zero” and “five” extremes. With societal attitudes to sustainability polarising, understanding what your potential customers really think and – more importantly – what they will actually do, is essential if one is to design a successful sustainability strategy.
In 2023, CEOs have an unexpected opportunity to out-think their competitors, by understanding the nuance of their customer views and planning accordingly. Unexpected opportunities include “getting on with” sustainable actions without the corresponding public grandstanding; ensuring that sustainable activities are grounded in solid business rationale to create “win-wins”; and fighting one’s own heuristics to correctly differentiate between what potential customers “say” and “do.” All of these will be required in 2023 if CEOs are to construct a successful business strategy that also addresses sustainability.
James Purcell is the Group Head of Sustainable Frameworks at Credit Suisse and co-author of new book, Sustainable Investing in Practice (available to purchase now for £34.99, published by Kogan Page).