Sustainability is a central topic for business leaders today. Both obligation and opportunity, it holds the promise of long-term competitive advantage and stakeholder value creation – yet may require a number of difficult trade-offs in the short term. As leaders in India assess how their organizations move sustainability agendas forward, there is still much to learn about the internal structures, leadership competencies and best practices that will make the journey successful.
To better understand what it takes for companies to fully embed sustainability into strategy and operations, and the role of human capital leaders in advancing these sustainability efforts, a group of leading Indian HR executives across various industry sectors recently joined Russell Reynolds Associates for a candid set of discussions.
In brief, HR leaders have a significant role to play creating sustainable organizations. Their remit includes co-creating the sustainability strategy at the board and C-suite level, developing talent management systems that prioritize sustainability and helping to embed a sustainability mindset into the culture at large. In this role, HR has the opportunity to select and develop leaders who will implement sustainability initiatives today, while also equipping the next generation of leaders to manage it successfully in the future.
Here, we share the top six observations and points of advice emerging from our discussions with HR leaders, as well as a useful framework for assessing and selecting future leaders based on Russell Reynolds Associates’ extensive research:
1. Sustainability: No more a question of “why” but “who” & “how”
Few sustainability initiatives get off the ground without encountering resistance. Short-term financial concerns are some of the top challenges to implementing a holistic set of sustainability best practices. Ideally, sustainability measures will be embedded into every part of the value chain, from sourcing to packaging to distribution to waste recycling. But as organizations make such shifts as choosing cleaner energy sources in manufacturing plants or compostable instead of plastic packaging, they often face higher near-term costs. Those shifts result in an immediate hit to margins and increased costs to consumers.
Given this trajectory, HR executives noted it is essential to select leaders who have the conviction and knowledge to overcome such initial hurdles. Identifying sustainability “supporters” will not be adequate—instead organizations need sustainability “warriors” to handle the inevitable conflicts involved in transformation.
2. Driving sustainability requires a long term mindset across all stakeholders
Another challenge associated with setting sustainability goals is that their results may take a long time to materialize. In the absence of immediate success stories, it is imperative for leaders across the organization to take a long-term view and extrapolate how current sustainability measures can lead to concrete, high-return outcomes. This futuristic vision will help paint the picture of success and enable leaders to counter some short-term objections. To that end, it is not only essential to select executives who will defend their position, but also to have board members and other stakeholders who will support long-term objectives even without quick wins. Organizations will need to in parallel build this into their ethos and culture down the line as well.
3. Identify the leadership competencies that drive sustainability
As Indian businesses increasingly prioritize sustainability, they will need to identify and develop leaders with the right competencies to make their efforts successful. To help screen for leaders who have these competencies, Russell Reynolds Associates created the Sustainable Mindset model based on interviews with global CEOs and C-suite executives who have implemented holistic sustainability strategies at one or more companies in the past.
Leaders with sustainable mindsets demonstrate four critical attributes:
Multilevel Systems Thinking
This competency involves looking beyond the immediate marketplace to influence the entire ecosystem
This requires broadening the definition of a stakeholders to include not only investors but also employees, suppliers, consumers, communities, and future generations in strategic considerations
The ability to challenge the status quo and productively drive innovation across businesses and ecosystems
The resilience to stay the course, regardless of short-term setbacks
“In emerging markets, it is rare to find leaders with proven credentials around sustainability – primarily since this is a new focus area here. Hence, companies will need to go beyond credentials and experiences, and look out for mindset and competencies. An assessment of behavioral values for executive hiring is a must.”
Global HR leader for a large Indian automotive manufacturer
This framework can be integrated into leadership development and succession planning processes as well as selection processes. By using a consistent framework, organizations can ensure that sustainability-related values and competencies gradually get stronger over time. Businesses must further create a roadmap that has sustainability elements formally defined to create a clear path forward for the next generation.
4. Hire executives with the leadership competencies and values that could drive sustainability
Since sustainability credentials are relatively scarce among senior leaders in emerging markets, competencies and values can provide a useful proxy. A demonstrated interest in sustainable practices and a commitment to the cause is one positive factor. In the absence of direct sustainability experience, especially in emerging markets, it is essential to screen for more general values, such as being open to change and to new ideas.
“We look at primarily purpose and service—which we assess while hiring talent across the organization. When you start probing into purpose and service, you do come across a set who either believes or doesn’t believe in sustainability. The best practice is to keep the philosophy of hiring on these two parameters calibrated throughout the roles and levels when you hire.”
HR leader for a large multinational FMCG player in South Asia
5. Tracking and rewarding against the right metrics is essential to move the needle
The most prominent challenge in taking sustainability to the front line is a perceived lack of connection between sustainability goals and performance. To get more traction, it is essential to translate sustainability goals into metrics that will resonate with each level and function within the organization. These metrics must also point toward long term goals, so that leaders are not overly swayed by other short-term incentives. Linking performance and rewards to these sustainability metrics can help leaders focus on the bigger picture, as well.
6. The sustainability culture has to transcend across all levels of the organization
While sustainability can be cascaded down from the top, it must ultimately be woven into an organization’s fabric and feel important to all employees. To help create this understanding, businesses need to link hiring, behaviors, performance and rewards to sustainability at all levels to help trigger the transformation across the company.
“Our performance management system breaks employee KPIs into three buckets: Immediate (addressing core short-term metrics), medium term (addressing systemic transformation), and long-term (addressing long-term sustainability).”
HR leader for a large FMCG foods & beverages giant in India
Nidhi Chandel is a member of the firm’s research team. She is based in New Delhi.
Arunima Poricha is a member of the firm’s research team. She is based in New Delhi.