Ethical Corporation is now Reuters Events - LEARN MORE
Corporate responsibility directors need more commercial awareness if sustainability is to be at the core of business, says sustainability adviser Adam Werbach
Adam Werbach is no stranger to controversy. The environmental activist turned corporate sustainability adviser outraged fellow greens when he decided to work with Wal-Mart in 2006. Now he is turning on corporate responsibility directors whom he feels might not all be up to their posts.
Werbach took a risk when he started advising Wal-Mart on how to go green. “The truth is, Wal-Mart could’ve blown up,” he says, referring to how the retailer’s sustainability drive could have collapsed into greenwash.
Ten years earlier, a 23-year-old Werbach had become the youngest ever president of the Sierra Club, America’s oldest and largest environmental campaign organisation. Once he crossed over to Wal-Mart, however, former activist friends accused him of selling out.
As doors to his activist past closed, others opened – into the boardrooms of corporate America. Chief executives saw how Werbach had helped to set Wal-Mart, and its suppliers, on a more sustainable footing. They wanted to know what the kid from California could do for them.
Today Werbach advises clients including Dell, General Mills, Procter & Gamble and WellPoint on sustainability, while continuing to work with Wal-Mart. It’s good business: in 2008, Werbach sold his consultancy to Saatchi & Saatchi to create Saatchi & Saatchi S, the global advertising firm’s sustainability practice.
Werbach describes himself as a “corporate activist”. He has rebuilt bridges with former colleagues and green campaigners, and insists that he remains faithful to his non-governmental organisation roots. “I’m still an activist,” he says, “I still piss people off.”
Despite this, the latest target of Werbach’s campaigning – corporate responsibility directors – comes as a surprise.
Werbach is passionate about the need to either destroy or reform corporate responsibility by merging it with business strategy – quickly. He is worried that most of the corporate responsibility directors he meets cannot explain how their work drives company sales.
He says: “In my experience, most CSR people cannot answer the question: how does your company make money and how do you connect to that? They’re much more about licence to grow, risk mitigation and corporate reputation than they are about core business strategy – how you sell more stuff and save money, to make more money to keep doing it.”
A lack of commercial awareness is holding back corporate responsibility directors, who care more about how they protect rather than create value for their companies, he says. As a result, corporate responsibility directors stand little chance of being promoted to top leadership roles in their company, Werbach believes. “The number of CSR people who are respected by the CEO as one of the up and coming future leaders of the company, someone who is expected to become a future CEO, is one in a hundred – maybe one in a thousand,” he says.
Werbach admits that many people in corporate responsibility are “doing the right thing”. But he worries that deep down, they are too attached to their roles on the margins of a company to advocate radical change to how their company does business. “The biggest barrier, to be honest, is frequently the CSR people. I freeze them out of corporate conversation because they are stopping the change the CFO or CEO wants to make.”
Werbach’s views point to the divide that still exists in many companies between corporate responsibility and core business, despite efforts to embed sustainable business practices in companies. This is especially true among US companies, where corporate responsibility remained, until very recently, largely about community investment.
Yet even corporate responsibility leaders in the UK struggle to integrate social and environmental concerns into core business strategy. BT chairman Sir Michael Rake told academics at last year’s European Academy of Business in Society conference that his company – highly regarded as a responsible business – was yet to fully embed corporate responsibility in its operations.
This will change, as companies start to give future leaders experience working in corporate responsibility. Wal-Mart runs its top talent through sustainability in the race for top jobs, says Werbach. So it is only a matter of time before major global companies will be led by individuals who have done a stint in sustainability, he says.
This could happen within the next 10 years, according to Prof David Grayson, director of the Doughty centre for corporate responsibility at the Cranfield School of Management. “It is entirely credible that in the next decade we should be looking to see someone who has held a sustainability role go on to be a FTSE 100 CEO,” he says.
A recent research report from the Doughty centre and Odgers Berndtson, an executive recruitment firm, finds that companies are starting to hire people into corporate responsibility or sustainability roles from other business functions. Grayson says, in the introduction to the report: “The key attribute [of a new recruit] is a deep understanding of the business, strong networks across the business and the credibility and access to do the business.”
The need for corporate responsibility teams to deliver a business strategy that will drive sales for their company now and in the future is more urgent than ever, believes Werbach. In his new book – Strategy for Sustainability: a business manifesto – he argues: “We are experiencing the most dynamic moment for business strategy since the Great Depression.” The financial crisis is forcing companies to rip up the rule book and start again, he says.
“Every company that wrote a strategic plan in 2008 – a year ago – is rewriting it today. Everyone who did one in 2007 is not even referring to what they wrote then. I don’t know any company that is still running on the exact same plan, because the world has changed,” Werbach says.
The companies most affected by the current crisis are those that have failed to get a handle on long-term threats to their business model, such as the US car industry. A combination of spiralling healthcare costs, lack of technological innovation, and oil at $40 to $50 a barrel has wrecked GM and almost done for its rivals. The lesson for other companies, Werbach says, is to keep tabs on these trends in society, technology and resources before it’s too late.
A clear understanding of these long-term trends must inform a company’s strategy for sustainability, Werbach says, which he defines as a business strategy that equips a company to “thrive in perpetuity”. Like all strategies, it needs a goal. Werbach says a company must aspire to solve a “global human challenge” in a way that is connected to its core business.
Dong Energy is one company to set itself a bold, far-reaching goal. The Danish utility is responsible for one-third of that country’s greenhouse gas emissions. It now aims to flip its fuel mix from 85% fossil fuels and 15% renewables to 15% dirty and 85% clean energy within a generation. “It’s a beautiful goal,” Werbach says, because it can be translated into simple actions for everyone in the company, whether they work in a coal plant or on a North Sea wind farm.
Beyond built to last
In his book, Werbach takes issue with companies which once were deemed to have been “built to last”, a reference to the famous business book – Built to Last: Successful habits of visionary companies. Its authors, James Collins and Jerry Porras profiled 18 companies who they said had cracked how to be profitable in the short and long term. These firms had done so by developing organisational capabilities to anticipate and respond to change, the authors argued.
The trouble is, the performance of many companies lauded in the book has declined in recent years. Boeing, Citibank, Ford, Merck, Motorola and Sony have all struggled to maintain their strong financial performance since the book was published in 1997. The cause of the decline, Werbach argues, is that these successful companies became so enthralled by their own way of doing things that they closed themselves off to new ideas from the outside world.
Werbach calls this the “organisational cult problem”. He explains: “It creates a certain dogma which can’t be attacked, because if you attack the dogma then you threaten the soul of the organisation.” In short, bad companies believe they are always right. In contrast, good companies know they do things wrong. “Coming forward with a problem is a form of transparency,” Werbach says.
A culture of openness, both within the company and between the company and outside world, can prevent a company from turning into a cult, Werbach says. Just as important, he adds, is encouraging staff to try out new ideas. Werbach points to the broad-minded approach of another Danish company, insulin maker Novo Nordisk, which he is talking to about how it can connect diabetes and climate change.
“Doesn’t it sound ridiculous?” he says, his eyes lighting up. “It might be.” For Werbach, that’s the point: companies should not be afraid to experiment in sustainability where they can. Research his consultancy has done in the US found that people who care about the environment are more likely to take care of their own health. So perhaps the link between taking your medicine and recycling your rubbish is not as obscure as it seems on the surface. As Novo Nordisk loses money when people forget to take their insulin, it makes sense for the brand to think creatively about how to reinforce that message.
Such ideas are clearly what get Werbach up in the morning. Ultimately, he says he wants brands to inspire people to lead more sustainable lives. He says: “Our work is to prepare the corporation to be able to carry the sustainability message. Because right now [companies] are not trusted to do so because they don’t get it at a corporate level, so it’s greenwash when they try to communicate it out. Once a corporation really gets the strategy, they can be those messengers.”
Werbach is one corporate activist whose work is not done yet.
About Adam Werbach
Werbach has always been an activist, but has fallen out with his own side as often as not.
- In 1996, at age 23, he was elected the youngest-ever president of the Sierra Club, the oldest and largest environmental organisation in the United States.
- In 2004, he pronounced environmentalism dead, in a speech that shocked the Commonwealth Club of California. He argued that green campaigners had failed to do enough to link environmental objectives to social and economic goals.
- In 2006, he controversially started advising Wal-Mart on how to go green, helping the retailer engage its 1.9 million employees in its sustainability push. This despite having described the company, in his 1997 book Act Now, Apologize Later, as “a new breed of toxin”.
Adam Werbach’s new book – Strategy for Sustainability: a business manifesto; How to sustain a business in turbulent times – is published on July 6 by Harvard Business Publishing. ISBN: 978-1-4221-7770-9; $29.95.