Too often, business leaders default to incremental or quick-fix solutions that fail to address the root causes of the issues they set out to solve. Correcting our course means fundamentally changing how we think and act, and asking hard questions about why businesses exist.
Right now, businesses are painfully aware of the need to rapidly equip their leadership teams with the knowledge and capabilities to effectively navigate an increasingly volatile and rapidly changing operating context.
It comes as attempts to keep global temperature increases below 1.5⁰C remain wildly off track. Many of the world’s largest companies have pledged to reach net zero by 2050; and some — including Amazon, Procter & Gamble and Salesforce — have signed onto a Climate Pledge committing to net zero by 2040. However, in the US, few companies that have made net-zero commitments have created the new business models needed to enable them to actually thrive in a net-zero economy; and in Europe, only 5 percent of businesses are on track to hit targets in their own operations (Scopes 1 and 2).
Even when business leaders do act, too often they default to incrementalism (small-scale and short-term changes) or look for quick-fix solutions that paper over the cracks but fail to address the root causes of the issues they set out to solve.
It’s not surprising that we’re here; after all, business schools have not prepared leaders for the level of disruption we’re all experiencing or opened our eyes to the sheer amount of transformation required for a hopeful, liveable future. But as time runs out, we need to confront a stark realisation: Correcting our course means fundamentally changing how we think and act, and asking hard questions about why businesses even exist.
Businesses that give me hope
Some business leaders are bridging gaps in knowledge, ambition and innovation. Multinational spirits company Diageo, for example, has designed an ambitious strategy that has seen it collaborate with Encirc to produce net-zero glass bottles at scale by 2030. The bottles will be manufactured in what is understood to be the world’s first furnace that uses a mix of electricity, low-carbon hydrogen and carbon-capture technology.
Or take Patagonia, which has long been a trailblazer — from an early adopter of circular strategies to pioneering regenerative practices. The owners recently transferred their ownership of the company — valued at $3 billion — to a specially designed trust. Patagonia will remain a for-profit company; but all profits — approximately $100 million per year — will be used to tackle the climate crisis and climate justice, and protect undeveloped land around the world.
As part of its Target Forward strategy, Target is investing in solutions that protect, sustain and restore nature; while its Racial Equity Action and Change strategy is seeing the company publicly advocate for voting rights.
Elsewhere, Clif Bar & Company is bringing its company purpose to life through its ‘Five Aspirations’, or ‘five bottom lines’: sustaining people, community, planet, brands and business. This involves embedding practices that restore living systems with initiatives spanning employee wellbeing, climate justice, protecting and restoring natural resources, and its supply chain.
All examples of large, successful businesses embracing the changes needed to become future-fit — but how do we motivate others to follow suit?
3 leadership unlocks to become a future-fit business
To enable transformational change at scale and pace, in the face of volatility and disruption, leadership teams must:
Wake up: Change starts with recognising the radically disrupted operating context in which your business sits. The latest IPCC report outlines the inevitability of certain climate breakdown and the shocking cascade of disruptions our societies and economies will face as a result. With greater uncertainty and less stability, leaders need to look ahead and consider the various scenarios of tomorrow. It’s here that applied futures become a key tool to understand and prepare for volatility. For example, IKEA has ditched fixed strategy roadmaps in favour of a scenario-driven approach that is more adaptive to rapidly changing external conditions.
See clearly: Leaders must fully appreciate the complexity and interconnected nature of the challenges we face and build capabilities to navigate them, which is where systems thinking comes in. Climate change, inequality, ailing biodiversity — all are systemic issues that require systemic solutions. Effective leadership involves inspiring your teams to develop interventions with game-changing potential to tackle multiple issues simultaneously. For example, carpet tile manufacturer Interface used its Net Works project to not only create carpet tile from ghost fishing nets in the Philippines, but to shape an enduring business model that gave local fishermen bank accounts and a new source of income, supported marine biodiversity and grew sales.
Dream big: Unprecedented operating contexts require an unprecedented level of ambition. Ask why your business exists and what that means for how it operates. How can you look beyond short-term profit maximisation to enable both people and the planet to thrive? This requires a new way of thinking and acting, centred around justice and regeneration. It also requires you to explore new concepts and business models as part of a journey that once started, never ends.
It all comes down to accepting an inevitability: Old ways of working will not sustain us in this new, ever-changing world. Only by waking up, seeing clearly and dreaming big can we transform the purpose of business. Those willing to do so can get ahead; those that aren’t risk being left behind.