Getting Fit for the Future – Sustainability and Management Consulting
Several weeks ago, I explored the effects of a volatile economy on management consulting. I would like to explore management consulting and another type of volatility – dramatic changes to our natural environment. There is plenty of evidence from which to draw conclusions about the nature and magnitude of our footprint on mother earth. We are witness to a daily barrage of news and opinion about our planet and how we are affecting weather and many other aspects of the ecosystem – often negative, sometimes positive. Clearly, our daily habits and routines have an effect. The policies, processes, procedures, and habits of the organizations we serve often make a greater impact.
Several months ago, I approached Tamara Connell and Chad Park, Executive Director of the Natural Step (http://naturalstep.ca/) to discuss the relationship between management consulting and sustainability. As a first step, we thought a brief exploration of the intersection of consulting and sustainability would help to raise consciousness.
By virtue of the role they play in the organizations they serve, management consultants need to be well-versed in issues and trends affecting strategy, innovation, and organizational change. In 2015, this means management consultants need to “get” sustainability. In other words, being fit for the future as a management consultant means having the skills and knowledge to help clients be fit for the future.
As early as 2009, Harvard Business Review famously touted sustainability as “the key driver of innovation” in business. Indeed, from aerospace to insurance companies, retailers to oil and gas firms, most major businesses now have a sustainability strategy and function in their organisations, as do other institutions like universities and municipal governments.
Why all the fuss? Is this a fad that’s likely to pass?
The answer is no. Simply put, the health and future of our human species – let alone our organizations - are in a very precarious position. You need not look far to find statistics indicating a dire picture of the state of the ecological and social systems upon which our economy depends.
"It is difficult to overestimate the scale and speed of change. In a single lifetime humanity has become a geological force at the planetary-scale," says Will Steffen, lead author of the recently released report The Trajectory of the Anthropocene: The Great Acceleration.
This report is the latest to confirm what many of us know but have little appetite to look at unflinchingly. It depicts the magnitude of negative effects that human activity is having on critical aspects of both our socio-economic system and the earth’s ecological support systems.
Several world leaders and notable public institutions have finally started speaking out about climate change – with media coverage notably shifting from a feigned ‘balance of opinions’ towards a more representative articulation of facts.
There are also a growing number of indicators that smart business leaders see sustainability as a critical issue to be addressed. The most advanced businesses see sustainability as a driver of success, through innovation and product/service development that creates “more good” instead of “lessening the bad.” According to a recent report by Accenture, 93% of CEOs surveyed believed that environmental, social and governance issues would be “important” or “very important” to the future success of their business (in both the 2010 and 2014 survey).
The CEOs surveyed list the following top three motivations in order of magnitude: Brand, Trust, and Reputation; Potential for Revenue/Growth or cost reduction; and Consumer/Customer Demand. These statistics are mirrored by those found and published my McKinsey & Company’s Sustainability’s strategic worth: McKinsey Global Survey results.
The pessimist may say the proof is in the pudding. Just this past February, Citigroup committed to $100bn USD to fight climate change by funding environmental projects. That should catch the attention of a few onlookers.
There is an old adage that says, “If you’re not part of the solution, you’re part of the problem.” Where do you sit? Where do your clients sit?
Are you able to guide your best clients towards a strategy and positioning that will help them seize the opportunity?
There is a big difference between sustainability being managed on the periphery of a business, and it being integrated into the core of the business strategy. The former is how it’s still done in most organizations, while the latter is where the greatest value is captured. This point is demonstrated over and over again, from global sustainable business leaders like Nike to Interface, to Canadian role models like The Co-operators or the Landmark Group of Builders. It is also supported by findings from both Accenture and McKinsey & Company:
Accenture: “Eighty-two percent of CEOs in the chemical sector believe that embedding sustainability into core business will drive revenue growth and new opportunities – and 58% expect sustainability to transform their industry within five years.”
McKinsey & Company: “According to executives, sustainability is becoming a more strategic and integral part of their businesses. In past surveys, when asked about their companies’ reasons for pursuing sustainability, respondents most often cited cost cutting or reputation management. Now 43 percent (and the largest share) say their companies seek to align sustainability with their overall business goals, mission, or values—up from 30 percent who said so in 2012.” [Reputation and Cost Cutting are next two most important motivators cited.]
Management consultants who want to stay relevant will need to be able to help clients navigate the complexity of the sustainability journey in a way that helps them capture value, helps them pro-actively address consumer/constituent expectations, and helps them make meaningful change towards the performance that our future requires of us.
The skillset required for this certainly draws heavily from the general body of knowledge and practice of a good management consultant (e.g. developing strategies, identifying and seizing new opportunities, managing change efforts, etc.).
It also requires new knowledge and skillsets. Perhaps the most important of these is sustainability literacy, which we can define as the knowledge and mindset that help compel an individual to become deeply committed to building a sustainable future and that allow him or her to make informed and effective decisions to this end. While it is not the only factor, the sustainability literacy of the leaders in an organization is clearly an important contributor to the organization’s ability to approach the challenge in an integrated – versus haphazard – way. It is also often a key factor in shaping both the organization’s level of ambition and the commitment of its people to succeed in achieving its sustainability vision. Management consultants can help clients build sustainability literacy in a way that includes helping them get explicit and specific about the value proposition in becoming a more sustainable enterprise.
Also very important is a skillset in sound methodology for helping an organization integrate sustainability strategically. For example, management consultants should be well-versed in the process of “backcasting” – helping clients to develop a clear and compelling vision of the organization in a sustainable future and assessing today’s performance relative to that desired future. A key role for the management consultant is in making sure that in the setting of visions/goals, the organization maintains the creative tension that is essential for innovation (instead of our more natural tendency to seek incremental adjustments to the status quo). This requires subtlety and empathy, and also the ability to facilitate a rigorous application of science-based principles in both the visioning and current reality assessment. A strong backcasting skillset will also enable a management consultant to help clients handle the inevitable trade-offs that come as they consider different possible investment and strategy paths.
However you approach it, clearly sustainability is not just a passing fad. It will become more and more central to organizational strategy in coming years, and doing it well will take a “higher level of management consulting.”