The challenge of... leading responsibly & sustainably
Business leaders, for a long time, have been judging the difficult balance between financial objectives and the impacts of their activities on society and the environment. This balance is increasingly important, as shown for example by the rise in “ESG” (Environmental, Social, Governance) investing, i.e. where investors are increasingly considering these non-financial factors in their investment decisions.
Socially responsible companies or sustainable organisations often articulate their approach to this challenge as…
- sustainable business practices
- ethical leadership and ethical business practices
- corporate social responsibility (CSR) strategy
- sustainability strategies
- corporate responsibility policy
- corporate social responsibility
- responsibility and sustainability policy
- sustainable development policy
Definitions 
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“The global exercise of ethical, values-based leadership in the pursuit of economic and societal progress and sustainable development, and the art of motivating, communicating, empowering, and convincing people to engage with a new vision of sustainable development and the necessary change that this implies.” (The United Nations Global Compact and European Foundation for Management Development)
“The management of a corporation’s interactions with society aimed at addressing the corporation’s various stakeholder concerns and contributing to the multiple bottom lines of economic, social, and environmental performance. The leader is thereby the one who enables and moderates interactions with the various stakeholders of the company.” Manage magazine
- People, planet or profits
- Balancing short term profits versus longer term value
- Sourcing more expensive local materials, versus less expensive from overseas
- Sourcing more expensive local labour, versus less expensive from overseas
- Developing more sustainable energy (e.g. wind farm) projects that face community opposition
- Building more expensive but environmentally less impactful (e.g. underground infrastructure)
- Developing a ‘work from home’ policy that satisfies diverging employee preferences
- Balancing the high capital cost of a new electric vehicle fleet, versus the reduced operating cost
Responsible & sustainable leadership
is necessary in many contexts, including:
Whilst many corporations and government organisations have well evolved ethical policies and “codes of conduct” (e.g. that reference the UN’s Sustainable Development Goals), policy documents cannot always prescribe clear solutions or answers to every difficult dilemma that real world leaders face, including how to find the right compromises when encountering conflicting stakeholder interests. Business ethics inevitably has some ‘grey areas’ hence skillful leadership and judgement is usually required.
With the increasing need for corporations to act responsibly, and with greater scrutiny of their CSR and environmental, social and governance (ESG) policies and impacts, today’s business leaders need to put sustainability at the heart of their strategic decision-making. Defining policies is one part of the challenge, but actually implementing these policies ‘on the ground’ is often a bigger challenge.
Business leaders in many sectors, such as construction, infrastructure, energy, natural resources, food, transport, tourism and retail are under increasing pressure to meet not just their financial objectives, but also a range of environmental and social objectives too. Also known as the people-planet-profit “trilemma” or “triple bottom line”, this challenge is directly connected to stakeholder engagement, i.e. understanding and creating value for interested parties that have directly conflicting priorities and agendas.
Real world challenges
Prendo’s customers face many challenging questions when leading responsibly & sustainably:
How should we balance our short term financial priorities with the sustainable development priorities that they might be in direct conflict with?
How do I reconcile my personal core values that are sometimes in conflict with some of our shareholders’ interests?
Should we decide on the basis of what is the “right” thing to do, or what produces the “best” outcome?
How do I prioritise my stakeholders: should it be based on their relative power, or the legitimacy of their interests?
To what extent should we be considering future generations (i.e. our grandchildren) and their needs for the world’s finite natural resources?
In order to maintain and increase employee engagement, we need to offer competitive salaries from an organization whose overall purpose goes beyond maximizing long-term profitability
Advanced simulations can help leaders address these real world challenges
At Prendo, we believe that the complex skills and deep understanding that are needed for leading responsibly & sustainably are best developed with advanced simulations that provide accelerated experiential learning and the opportunity to explore the underlying cause and effect models.
Talk to us to understand if our simulations can address your specific challengesLearning to lead responsibly & sustainably
To address the challenge of leading responsibly & sustainably, leaders need a combination of skills (know-how) and understanding (know-that), in the same way that the driving test combines the practical and the theory:
leaders need to be able to…
- identify and prioritise stakeholders
- quantify stakeholder related risks & opportunities
- balance conflicting stakeholder interests
- develop trust with stakeholders
- protect shareholder value & corporate reputation
leaders need to understand…
- what “responsible” and “sustainable” mean in practice
- what “purpose” is, and the range of different success parameters
- the key concepts of business ethics, including the difference between deontology and utilitarianism
