To stay competitive in the 21st century, CEOs must embrace the new challenges of the sustainability revolution. In the past, they operated under one premise: "make your numbers and all will be well." But today, that is not enough.
There are competing priorities such as resource depletion, governmental regulations, community obligations, employee relations and global pressures, which can affect the bottom line. In addition, boards are beginning to ask CEOs to get ahead of the issues and produce sustainability metrics. Consequently, they must accept a new set of ground rules and develop a sustainability strategy to compete in this new arena.
In the past, success in business was determined by size. In the future, success will be determined by knowledge and a sustainable culture.
Senior executive thought on sustainability is evolving. For the manufacturing and resource extraction sectors, sustainability means environment, health and safety with a focus on regulatory compliance. For the service sector, sustainability means environment, social and governance with a focus on "corporate citizenship."
We believe that sustainability is the convergence of both approaches. At Duquesne University, our definition of sustainability includes ethical management practices, environmental stewardship, responsible financial management and community engagement.
Some executives still consider sustainable initiatives costly and complain that they do not deliver immediate financial results. But the new "sustainable executive" embraces sustainability as a business opportunity, rather than a regulatory burden.
They lead their organizations by three principles. The first is Rational -- focusing on efficiency, cost savings and conservation. The second is Natural -- understanding that businesses and the environment are interconnected and that historical practices of externalizing environmental costs are ending. The third is Human -- fostering safe, healthy workplaces and allowing employees to share in the success of the business. Sustainable executives "break down the walls" and allow knowledge to spread throughout the company, enabling all employees to participate in the success of the business.
Sustainability strategies are creating value for businesses. For instance, in the recent McKinsey study "Valuing Corporate Social Responsibility," two-thirds of the CFOs surveyed indicated that sustainability increases profits and shareholder value by up to 12 percent. In the Aberdeen Group's survey "Sustainability Matters: The Corporate Executive Strategic Agenda," 59 percent of respondents said that sustainability is a major part of their corporate strategy or will be in the near future. And most notably, many multinational companies are beginning to follow the Global Reporting Initiative, a template for reporting sustainability efforts. Institutional investors are beginning to use disclosures, such as the Global Reporting Initiative, to assess their investment implications.
In 2007, Alan Miciak, Ph.D., dean of the Palumbo-Donahue School of Business, launched a revolutionary concept in graduate business education at the time -- the Sustainability MBA program. He believed that by integrating the four elements into a comprehensive graduate program, we would prepare our graduates to become next generation leaders. In addition, the Beard Institute, the school's innovative outreach center, transfers our sustainability experience to corporate, nonprofit and academic audiences. This past October, the Aspen Institute's Global 100 ranking of graduate business schools placed Duquesne 18th in the world for the integration of environmental stewardship, social responsibility and ethics education in the curriculum.
The sustainability revolution has introduced a new set of ground rules where compliance is not enough. Compliance is only a defensive approach that does not lead organizations to innovative opportunities. The sustainable executive thinks more broadly about stakeholders, even beyond customers, employees and communities, by considering the impact of the business on society at large. They do more than just comply with regulations: They create a bridge to the future by developing a multi-stakeholder strategy that truly benefits shareholders.
James J. Byrne is executive director of The Beard Institute, Palumbo-Donahue School of Business, Duquesne University. First Published March 16, 2010 4:00 AM