3 Simple Words to Sustainability

ESG Sustainability
Sustainability

An interview with Pooja Khosla of Entelligent

Summary

Many leaders would like their organization to be more sustainable. However, the path is not easy and one major challenge is dealing with the short-term demands of investors. In this article, Pooja Khosla, VP Client Development at Entelligent answers the following key questions:

  • What are the key challenges to organizations becoming more sustainable?
  • What are the answers?
  • What are the key lessons for anyone wanting to help their organization become greener?

The key lessons lie in three keywords: Education, Engagement, and Momentum.

Some background of Dr. Pooja

Dr. Pooja Khosla is an economist and mathematician with a deep interest in sustainability and the financial effects of climate change. She has nearly 20 years of experience in predictive modeling, microfinance and designing climate impact tools for investors, banks, corporations and other organizations like the United Nations. She has been working with Entelligent since 2016 developing its data science team, its Smart Climate system and its climate risk related products.

Entelligent (www.entelligent.com) is one of the most respected brands in climate risk assessment. It recently announced a partnership with Société Générale to launch an index to score companies in the S&P 500 on their exposure to environmental issues.

What are the key challenges to organizations becoming more sustainable?

I began the conversation by asking her what the key issues are holding back firms from becoming more sustainable, more quickly.
Pooja: “There is certainly a lack of understanding of the issues. For example, some organizations sign up for a Net Zero commitment without understanding what they have signed up for. They do not realize that the scope of the commitment could include their whole value chain from suppliers down to their end consumers.
There is also certainly a problem with greenwashing. It is easy for firms to aim for minimum acceptable performance, like complying with environmental regulations, and then beefing up their messaging to make it appear that they are committed to sustainability.
90% of S&P 500 Index Companies published Sustainability Reports in 2019, however, less than 11% of the organizations were meeting qualified reporting standards.“

What are the answers?

We then turned to her thoughts about the answers to these challenges.

Pooja: “One thing to bear in mind is that 20 companies in the world contribute to one-third of global greenhouse gas (GHG) emissions. That means that whatever improvements we can make in these few companies and their value chains will have a significant impact on global emissions. Of course, most of these companies are in the fossil fuel business and it is not easy to turn them around. However, we have seen a flurry of recent announcements (for example at ExxonMobil) about a much stronger commitment to sustainability which gives me hope that this sector is now turning.

A key to delivering real change is education. Investors are now much more knowledgeable about climate risk and its financial impacts. More investors understand that sustainability can affect valuations in the short term as well as the long term. They have seen the dire effects of sudden extreme weather events on agriculture, hospitality, and transport and the rapid damage that a consumer revolt can do to the brand of a polluting company.

We should note though that the actual levels of pollution or climate exposure in a firm is not the key metric. What is more important than actual levels is the rate of change. A firm that is maintaining its rate of progress towards sustainability can be more attractive to an investor than one where progress is slowing, possibly because all the easy actions have now been done.

We also need more engagement. First of all, we need more engagement from leaders. There is no doubt in my mind that some firms really are committed to becoming sustainable and are sustainability leaders in their sector. I would put firms like Ingersoll Rand and Volkswagen in this category. They are led by visionary leaders who are engaged with the issue and are driving it passionately. They do a better cost-benefit analysis of sustainability options. They also have a better understanding of the three types of climate risk. These are:

  • Climate transition risk. This is the risk that the organization does not change sufficiently in the desired time period
  • Climate physical risk. This is the risk to the organization from climate change including rising sea levels, hurricanes, floods etc.
  • Climate reputational risk. This is the risk to the organization’s brand reputation from its contribution to global warming.

Then there is the next category of firms that are the sustainability followers. They are keen to progress but lack the understanding and engagement of the sector leaders. Finally, there are the sustainability laggards. These are the slowest to change and see sustainability as a business distraction.

More engagement is also needed from investors. Things are moving in the right direction and we have seen great examples of good investor engagement recently, for example, in the latest annual letter to CEOs from Larry Fink at BlackRock where he makes it clear that he is looking to invest more in sustainable companies and less in unsustainable ones.

We also need more engagement from customers. Consumers and businesses need to tell their suppliers what is expected of them and move their spend to the most sustainable suppliers.”

What are the key lessons for anyone wanting to help their organization become greener?

To conclude, I asked her what key messages she would like to offer any green change agents out there.

Pooja: “I would summarize my advice in three simple words: education, engagement and momentum. By momentum, I mean both the direction of travel and the speed of change. It is no good traveling fast in the wrong direction. Nor is it useful to have high aspirations which are unattainable in our lifetime. It is better to keep moving in a good direction. This will build confidence and experience and is itself more sustainable.”

The journey to sustainability is not easy. However, focusing on these three words will help to ensure your efforts are well invested.

3 Vital Steps to make the Transition to a Good Growth Company

Good Growth Sustainability
Good Growth

Summary:

  • Making the transition to a sustainable  Good Growth Company requires significant change. Yet people often fear and resist change when it is driven by other people.
  • However, there are 3 core steps that will help you make an effective transition. They work because they recognize the importance of involving people in the change.
  • The steps are: create a clear need for change, share a compelling sustainable vision of the future, and create opportunities for involvement in the transition.

Introduction: what to do first?

So, you have decided to transition your organization to becoming a Good Growth Company (GGC) by focussing on delivering sustainable profits through sustainable and ethical growth in line with the Sustainable Development Goals defined by the United Nations. But this type of change is never easy. We all fear the unknown and especially change which is controlled by other people. We also have to push ourselves to break our old practices and embed new and more helpful ones.

How can you achieve a transition to good growth through good sensible leadership practices, in a way that values your people and their contribution to your company?

Three common change leadership mistakes to avoid

There are 3 mistakes which many leaders make when driving change in their companies:

  1. They do not explain why the change is necessary. They are obviously familiar with the reasons for the change and might even think that the explanation will demotivate people (and this is a danger) but more commonly, demotivation comes because people feel alienated from what is being proposed.
  2. They explain what will change but not what the change will deliver. This means that the members of staff in the company do not understand how the company or they themselves will benefit from what is happening.
  3. They drive change at pace because they know what needs to happen and this makes them feel comfortable. Sadly, the staff feels uninformed, uninvolved, and untrusted.

However, there are three change leadership steps that good leaders can use to create direction and momentum in major change initiatives:

Step 1: Create a clear ’need for change’ picture.

Step 2: Share a compelling vision of the future.

Step 3: Create widespread opportunities for involvement

Step 1: Create a ‘need for change’ picture

In thinking about the transition to a GGC, you as the leader of the organization will have thought a lot about the destination you want to reach. However, if this is the starting point of your engagement with your employees or colleagues, there is a danger of this seeming to be a personal crusade. If you have ever heard anyone describe a change as “change for change’s sake” then the leader has not answered the vital question of why the change is necessary.

The starting point for communicating the change needs to be why change? The more your staff can understand and feel the need, the more they will be driven to make the journey.

The ‘need for change’ might already be clear for your organization. There might be a clear outcome if you do not change – you might lose customers, costs might escalate, or you might become an also-ran in your market. This will make a need for change picture easy to create and easy to communicate to your teams. The only danger will be if you oversell it and make people feel as though you are threatening them.

On the other hand, your wish to become a GGC might be driven by a conviction that there must be a better way rather than the “writing being on the wall”. In this situation, it might be that your organization could successfully continue as it is, but you all agree that it would not be the place of which you are proud, allowing you to adhere to your values and convictions and stand out from the mediocre crowd.

You should not miss good opportunities to involve your team in developing the need for change. You might share your observations and some of your conclusions and ask them what they make of your observations, how they read them, whether they see indicators which say the same thing or even show a contrasting picture. Avoid asking ‘closed questions’ to which the answer is yes or no, for example, “Do you agree with me?” These questions are unlikely to promote openness.

You will know that it is time to move onto the vision when the questions and comments begin to ask, “What is to be done about it?” Be prepared to explain the next steps clearly.

Step 2: Share a compelling sustainable vision of the future

Having convinced your team that change is necessary, it is important to describe to them what you intend the future organization to be like. This vision should link to the need for change by showing that if the vision is achieved, the issues raised in the need for change will have been addressed.

It is also important to note that the vision might be a stretch in both imagination and practice for those who see it. Therefore, it needs to be clear to everyone that it is consistent with the past successes and capabilities of the organization.

The best visions are the ones that show the proposed future is a logical next step in the organization fulfilling its original purpose and values.

Above all else, the vision of the future should excite those who hear it. The vision should describe an organization in which they can see their values, that is, those of which they are proud. It should propose a challenge but also it should be achievable even if success is some way down the line.

The vision should be tangible and not an unrealistic pipe dream.

As discussed in the previous step, encourage discussion about the vision of the future. You may present a developed vision and ask for structured feedback using questions like, “How do you see the organization in the future? How does the vision make you feel about the future?” As before, avoid asking closed questions and “leading the witness.”

It might be that having shared the need for change in Step 1, you can then, in this step, involve your team in co-creating the vision of the future. My experience is that this is best done in small groups rather than one large group.

It might be that having shared the need for change in Step 1, you can then, in this step, involve your team in co-creating the vision of the future. My experience is that this is best done in small groups rather than one large group.

It is also essential that you discuss how the organization of the future might serve its external audiences like its customers, partners, and investors. It is always tempting to devote much time to talk about “our values” and what we can expect for ourselves, but introspective organizations can easily become self-absorbed and in the end, they can lack a driving purpose.

Once you have shared the vision be prepared to explain what will come next and what opportunities there will be for your team to be involved in the transition.

Step 3: Create widespread opportunities for involvement

We all know that when someone else makes a change that impacts us, it frequently induces fear because of the loss of control and the unknown future. However, when we make changes for ourselves or when we are involved in a change in our company, the involvement creates more of a sense of control and an understanding of the future. Both of these reduce the feelings of fear.

Great leadership is not achieved by pushing your ideas about the future onto your fellow leaders and all your team members. This will make you feel better, but it will make everyone else’s change more challenging. It may also lead others to question your espoused values.

One way to manage this dilemma is to “give up control to gain control”.

By creating opportunities for your team members to be involved in shaping the decisions and the implementation of change, you will support their change journey. After all, if they can see what you see about the world and the organization, will they not be able to draw the same conclusions?

In any discussion of change leadership, most practitioners place a high emphasis on the criticality of communication. It is true that communication is a vital component – our teams have to know what is happening. However, communication can be quite passive. The speaker does not have to relate to the audience or engage personally with the listeners, and the listeners in turn do not have to engage with the speaker or the content.

As leaders, we cannot (and would not) want to compel involvement, but most people will accept the opportunity to contribute provided they believe the opportunity to be a real one. The most important groups to involve are those who already have leadership responsibility in the organisation, and these are often the hardest to involve.

Any wise leader will involve the leadership team in shaping decisions. Merely consigning them to a role of making a Go / No-Go decision on a fully developed proposal wastes an opportunity to include their experience at best – and at worst it will alienate them.

Other groups should also be involved, both for the good of the program and for the good of them as individuals.

Examples of involvement opportunities include:

  1. Educational workshops at the start of the programme to share the principles to be used.
  2. Programme launch.
  3. Proposal / solution development.
  4. Implementation planning.
  5. Specific implementation issues and tasks.

Any involvement opportunity should be well facilitated as this will ensure that the involvement opportunity is seen as genuine. A time of open questions is always essential at these events as it reinforces the value you place on involvement.

Conclusion

As a leader wanting to transition your organization to become a GGC, you have already decided that you want to build your organization around the value you place on your people. By following these 3 vital steps you will demonstrate this value in your transition process.

 

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