Nothing much is achieved without leadership and the ruinous consequences of bad leadership are all around us, from Ukraine to Iran to Haiti to Russia to China, and, well, the list just goes on. And we haven’t mentioned the consequences of the shortest-serving prime minister of the UK.
Success requires firm leadership, but it requires leaders who fully understand the issues they must address. Without this knowledge they cannot inform and enthuse the teams who work for them. And we are by no means talking only about politicians. Leaders are vital in all organisations.
If we are to preserve a habitable environment and successfully meet the challenge of the climate crisis our organisations need competent, sustainable leadership. I spoke to Clarke Murphy, who knows about these things.
Anthony: So today, we're talking about sustainable leadership and why it's important that sustainability should be recognized and implemented by management at all levels particularly senior levels including the C-Suite and the board. As the presenter of the Sustainable Future Report I can certainly identify with that. My guest today is Clarke Murphy the former CEO and now leadership advisor at Russell Reynolds Associates. Clarke, welcome to the Sustainable Futures Report.
Clarke: Well it's a pleasure to be here. Thank you for having me.
Getting the Message Across
Anthony: Great! Sustainability and climate crisis—there are many people out there who deny the whole thing. Very few of them are dogmatic and angry about it but most people just don't really know or don't want to know because the pressures of living, the cost of living and so on in the immediate term is just too much. Our big problem surely is getting the message across to people without scaring them and leading them to just cut off and ignore the situation altogether. How do you get over this? Are you getting a positive reaction from your clients and prospects?
Recognition
Clarke: I think positive reaction—I don't know how you say that when there are a lot of challenges. Recognition, I think there is recognition and I look at sustainability in the broadest umbrella which may not just be climate change but also in terms of what's going on in the oceans or with hunger or gender equality etcetera. So in the broadest context, I think climate change is the one that gets people's attention or gets their frustrations up but I think most of the corporations in the world increasingly—which we'll get to I'm sure—the politicians of the world are saying listen there are various factors we have to make progress against or, A: our companies won't keep the brightest young people; or, B: companies won't have the institutional investors to provide the capital they need to grow their businesses. So, there is recognition and then there's action.
Demographics
Anthony: OK, now essentially you talk about the brightest young people. Are you seeing differences in attitude between the different demographics and different age groups?
Clarke: There's no question. There's no question at all and interestingly we did a piece of research called divides and dividends which saw that over 45% of senior leaders were very proud of their approach to sustainability and then some of the employees at the same companies said in fact they hadn't seen as much action. So, there's a divide between what one believes and what the younger people see. There's without question a difference in attitude between generations and in this book we've just written, we added a chapter called the “Nudgers” which is this next generation that says “I want to work” or “I will buy products where I believe in the company and in the value of the mission of the company” and it's and it's unquestionable at this point.
Well informed?
Anthony: So young people are enthusiastic. Are they well informed? Is the educational system actually giving them the tools that they need?
Clarke: I think there's two answers to that. I don't know if the educational system is giving them the tools—we'll come back to tools in a second—but it certainly creates the awareness and even broader awareness and the speed with which things are happening unquestionably. Around tools, I think companies are just coming to grips now with tapping the energy and identifying sooner the excitement around the sustainable agenda that the next couple of generations have and harnessing that energy and I think that's most important.
The Book
Anthony: You've just published a book called Sustainable Leadership: Lessons of Vision, Courage and Grit From the CEO's Who Dared to Build a Better World. Would you like to tell us about one of these CEO's who dared to build a better world?
Clarke: Sure, I mean there's a great number of stories and my belief was that there are hundreds and hundreds and hundreds of successfully commercial sustainable leaders, but we need tens of thousands and we need them rather quickly.
How-to Guide
So, the book is, in essence, a how-to guide for young leaders and even I would say CEOs of mid-size companies that aren't sure what the first step is and how to go forward. This book is mistakes made, lessons learned, and victories achieved through embedding sustainability in operations and culture. Take a guy named Heinrich who has now founded a startup called H2 Green Steel which is producing clean steel, one of the dirtiest businesses in the world. It’s a fascinating approach to clean energy using arc furnaces to produce clean steel and an amazing backlog of hundreds of millions of dollars of orders for car, auto, truck and manufacturing.
Biodiesel
When he was at Scania trucks, they produced one of the first biodiesel fuelled trucks in the world. He tells the story in the book of going one by one to the head of design and the head of engineering and the head of manufacturing and the head of distribution and the head of marketing to win them over to go to this bio diesel truck which is quite some time ago. So, they eventually roll it off the assembly line and nobody buys the truck. What he realized is—which he's doing differently at H2 Green Steel—is you needed to have a cascaded public vision across the organization and kind of going division head by division head by division head and picking them off one, didn't bring the full force of the company with you and two, they hadn't thought through everything as an entity. Ultimately, they did two things: they provided 10-year forward contracts on biodiesel for the trucks because the small trucker company was worried about purchasing biodiesel but more importantly, he tells a story going to the customer’s customer. So, they were doing local trucking and midsize trucks to the local hardware store or the local retailer, local shoe store and they went to those global manufacturers and said, “Hey do you want to send the message to your retailer that you're going to have a greener footprint of your supply chain if you use these trucks?” And those national manufacturers did do that, and the truck took off and now Scania is the leading EV truck manufacturer and alternative manufacturer. These lessons learned are things we can learn from people like Heinrich.
Role of Government
Anthony: Great so that's an example of how business can develop this vision. Now businesses work within a legislative environment; are governments doing enough? Are they actually helping or are they hindering? Do we need more government regulations, do we need coercion? What's the situation from that point of view?
Clarke: As you would know, it varies dramatically from country to country. So Germany being very far ahead, most of the Scandinavian countries being farther ahead than that, The United States being relatively farther behind than all of them. The Inflation Reduction Act or IRA was just passed. If you look in Atlantic magazine yesterday that just came out, their prediction is that digitization will create enormous numbers of jobs and industries because of the government incentives around sustainability. I think that one of the opportunities and challenges is there's an old expression that if you want to run fast you run alone, if you want to run far you run together. Where I think the most success has been in ecosystems of multiple companies working together with governments in partnerships because we need the private sectors balance sheets to move these things forward whether it's increased regulation or faster approvals in regulated environments to spur. Also, tax incentives and the IRA bill (Inflation Reduction Act) is providing incentives for sustainable businesses, and I think that's where you're going to have probably the most success from government. It's not more regulation but tax incentives and public private partnerships.
Patagonia
Anthony: Recently in the news we heard about Patagonia, the outdoor clothing company, a big multibillion company, and the owner decided to give it to his employees. Now that company is a role model for sustainability. Do you see the ownership model of companies changing influenced by sustainability or do you think that was a one off?
Clarke: I think it's probably a one off of that scale. Bear in mind in Denmark, one of the one of the great stable factors of business in Denmark is most of the great companies are controlled by trusts set up 200 years ago that assure the long-term governance of those companies. So with Patagonia you have something somewhat similar, it's a little more complicated than that. I do think you'll see startups; we tell the story of a company called a Hair Story in America which who knew that the chemicals that come out of shampoo and conditioner every morning down the drains of the world are some of the dirtiest chemicals in the world, it's like fuel. And those plastic bottles, to be approved, aren't recyclable typically. All those millions of plastic bottles. Hair Story is a startup owned by a family that's setting it up for the long term and they refill your pouch, which is fully recyclable, with clean shampoo and conditioner. In fact, you only have to wash your hair apparently like twice a week instead of more than that. So, I think there are also new models coming out that might emulate more sustainable ownership models like Patagonia did. Do I think a multibillion dollar company will put that in trust like that? It's very complicated to do. You may have seen that they have voting rights, that their 5% ownership that they retained gives them majority voting rights for the governance of the company which hasn't quite been picked up in the footnotes yet.
Can We Win the Battle?
Anthony: We're constantly told that time is short and that time is getting shorter. We see acts of vandalism like the Ukraine war which seems to be in another world and with no comprehension of the fact that we've got a climate crisis. We see the oil majors who are investing in thousands of miles of new pipelines to deliver products which will increase atmospheric emissions. Now in the face of all this, these people working against the measures to try and combat the climate crisis, are you confident that we can win this battle?
8 Harvests
Clarke: I think we have to move unbelievably quickly to win this battle. So Svein Holsether who is the CEO of Yara, the largest fertilizer business in the world, fertilizer being arguably one of the dirtiest businesses in the world, and he and the company have done amazing things to produce to reduce ammonia, reduce methane and they're actually producing clean fuel with their emissions to fuel clean ships—it may risk his building, so again this ecosystem idea. Svein said to me, I was in his office in Oslo, and he said, “Clarke we believe we have 8 harvests before things are irreversible.” 8 harvests—it's a very powerful phrase.
Anthony: I've heard 60. 8, well that's scary. Where was he talking about?
Africa
Clarke: He was talking about particularly in Africa and where they have to have much more abundant crops but cleaner ways to increase those crops. So, I do believe that we have to move quickly and use all the power that we can and all the partnerships that we can.
Divert Energy Profits
The one thing I'd say which you probably will being frustrated with me to say this, the fossil fuel industry which we all understand because of the world's dependence for another 20 or 30 years on the fossil fuel industry—that's the reality. As fast as we produced EV's and battery storage we are dependent for a couple of decades on fossil fuels particularly oil. What I think we have to do is be focused on their profits going to renewable sources in major chunks of their profitability as opposed to saying let's just not own any of the stocks and let's say how terrible the companies are. At the end of the day the world is running on fossil fuels for at least two or three decades while we develop our alternatives so let's focus on them using their profits, which several of those companies are, to really accelerate renewable energy in what we call the energy transition. I think that's where the pressure should be put which not everyone agrees with. As opposed to being dismissive of their profitability or their companies overall. I think that would be a grave mistake.
Balance
Anthony: That sounds like a sensible approach. I think you're probably right that we are going to be dependent on some sort of fossil fuels for a couple of decades. I don't want to believe it, I really don't because I think if we are dependent on fossil fuels for two more decades, then there is no hope of avoiding the tipping point of going way beyond 1.5 degrees centigrade. It's a difficult and a frightening situation. That brings us around almost a full circle to where I started: if you tell people this is a really scary and dangerous situation, they'll shut down, they won't want to know. So it's a question of a balance isn't it? Let's harvest the enthusiasm of the young people you were talking about and do as much as we can.
Skill Sets
Clarke: Correct I think that recognizing the skills... and we talk about in the book how we've developed a model of the most successful sustainable leaders and how they all share these four skill sets. Identifying those skill sets in younger leaders sooner will accelerate their careers. We tell the story of a young man Hector and a young woman Blanca who worked in the largest brewery for Heineken outside of Holland in Monterrey, Mexico and the two of them were very interested in circularity in terms of circular economy and ways to think about materials, supply chain brewing which uses a tremendous amount of water. They entered this global competition of who had the best idea about improving sustainability at Heineken globally which they won. In the end, they're now sitting in corporate roles in Amsterdam having left Monterrey because they had so much energy, creativity, and success around sustainability. That's the model. Reach down in and harness the energy and find people who understand complexity, who can think very long term, and who are very disruptive around innovation. These are the skill sets that companies and boards need to look for and even CEOs, to find those thousands of sustainable leaders and harness their energy to accelerate this progress.
Anthony: You mentioned four key factors—four key issues. Can you remind us what they are?
Four Key Issues
Clarke: The first we call multi-level systems thinking. What is that? That's complexity around systems.
Conceptual Thinking
Your company is already complex in its operations and supply chain and now we're going to overlay that with environmental concerns, perhaps regulatory concerns, societal opportunity, and issues. It’s the ability to handle complexity and to navigate opposing priorities and be decisive about it. So, conceptual thinking and decisiveness.
Stakeholder Inclusion
The second is stakeholder inclusion and not a stakeholder/shareholder debate of the last couple of years but would you include all of your biggest competitors to reach a solution for the industry overall. In Brazil LVMH, Henkel, Loreal and Natura all created an independent body around the cosmetics industry to self-judge and regulate the materials—the way they're extracted and produced in terms of positive labor laws and usage and then the supply chain impacts on the environment. So, an independent body created by themselves to judge themselves. They worked with their own biggest competitors to do what was right: stakeholder inclusion.
Disruptive Innovation
The third is disruptive innovation, we've all talked about innovation for decades. This is about challenging your own assumptions and if what you innovate doesn't succeed (Scania Trucks) to relook at the innovation around there and tap the thinking of others. It's largely about the consensus building and tapping the best thinking of other people and push that forward to something very disruptive even beyond your own thinking as a leader.
Long Term Activation
The last is long term activation. Again, we talked about thinking long term but if you're really successful and building green fuel super tankers, the Super tankers will probably hit the ocean when you're no longer in your leadership job. So can you conceive of doing the right thing where you will get no credit for it because it happened so far after you've gone. That's a true legacy build; that's long term. We found that over 90 of the most successful leaders around the world from India, China, Brazil, America, Scandinavia—they all dramatically shared these four skill sets and so that's how we built a framework to determine future leaders and current leaders.
Anthony: Thank you for that. So how do we run this out, how do we end this conversation? How do we face the future?
Take Action
Clarke: We take action. I think again some of the companies we talked about are very large with lots of resources and they can afford to put capital to work here but other smaller mid-size companies don't believe they can. So, the first is taking action. You don't have to solve every problem in the world but you can work on two or three of the issues in your own company whether it be water usage, power, logistics, gender, hunger in your supply chain of where things happen further down the supply chain, healthcare, etcetera. So did I look at sustainability as the 17 Sustainable Development Goals? Just work on one or two and you're going to unleash this energy of your company. Take action and listen. Actually, what I found in these interviews—purely anecdotal, nothing scientific—was the aggressive listening skills of these leaders which I think leads to them to better understanding their community, their employees, their investors and their board because they're more aware. It's not just listening. So, make sure that they're listening and the last thing I call the learning quotient. All of this is happening very quickly and we grew up in the world, Anthony you and I, the leaders were very hierarchical and they were the sage oracles at the top of the company. Well organizations have flattened dramatically, and the best leaders are learning about sustainable solutions at the same time as mid management is in their companies and so being able to recognize that if I learn at the same time they do I don't look stupid, I actually look smart.
High Learning Quotient for Success
The most successful companies and leaders are those who have high LQ or high learning quotients like a high IQ and that's companies that are agile, adaptable, seeing opportunities and moving on them. The listening and learning, and then acting on it, will make great progress quickly. Don't stand on the top of the mountain and think you have to know it all because you don't, particularly around sustainability.
Anthony: Clarke thank you very much for sharing your thoughts with the Sustainable Futures report.
Clarke: Really interesting! Keep going, do it more often. This is what we need to get messages out to help people keep moving ahead and accelerate their careers.
Anthony: Great well we continue to put the Sustainable Futures report out every week. Clarke Murphy's new book Sustainable Leadership: Lessons of Vision, Courage and Grit from the CEOs Who Dared to Build a Better World is out now and published by Wiley. Clarke is also presenter of the Redefiners Podcast. Thanks again.
Clarke: Absolutely, take care.
Next Week
And so we come to the end of another week and there will be another sustainable futures report next week. For the last few weeks I've shared interviews with people from a wide row range of backgrounds with a wide range of ideas. I hope you find them interesting and if you like them please let me know, and if you'd like something else also, please let me know.
Interview Requests
I get two or three interview requests a week from people all over the world although they are mainly in the United States. I bear in mind that this is an international audience on a UK base, so I am careful to try and avoid too much of a US bias. There’s no doubt that a lot of very good stuff comes from there nevertheless. Many of the interview requests are weird and wacky so I tend to reject more than I accept. I hope you think I'm accepting the right ones.
Topical Reporting
Anyway next week I'm back to topical reporting, to giving you my own personal thoughts and opinions on the sustainability issues currently in the news. As always I'm delighted to receive your thoughts ideas and suggestions and I know I've already had some which I haven't yet followed up but, as I've said before, I haven't forgotten.
Become a Patron
That's all for this week. It remains for me to thank you for listening. If you are, thanks for being a patron - details at patreon.com/sfr on how to help keep this podcast independent and ad-free.
Tell Others
Whether you are a patron or not, I would really appreciate it if you could tell just one other person about the Sustainable Futures Report. Since I started in 2007 I'm sure this must be the original sustainability podcast but I have to admit that others have overtaken it in terms of audience numbers. If you think it's worth listening to do, please, tell others.
That was the Sustainable Futures Report.
I’m Anthony Day.
Until next time.
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