If You’re Not Sustainable, You’re Not Really a CEO

Consultant Andrew Winston calls out the offenders, short term thinking, silo mentality, and big government’s fear of market principles.

I caught up with Andrew Winston not too long ago, the highly successful management consultant specializing in sustainability and green business strategies.

His first book, Green to Gold, named a top 30 business book by Inc., provided a road map for companies seeking to create value from environmental strategy. His next book, The Big Pivot, explored how companies around the world are managing the challenges of a “hotter, scarcer, more open world,” and suggests how these challenges can lead the way to a more prosperous economy.

When did sustainability become a strategic mandate for you?

I started my career at Boston Consulting Group, so my training led me to make everything a two-by-two matrix. But even back then, I thought about how to make businesses more flexible and resilient. Sustainability as a topic came a bit later in my career, and it seemed inevitable that companies would have to deal with issues like resource constraints and extreme weather.

What is the most significant business barrier to sustainability?

The major hurdle is short-termism, particularly in the C-suite and Wall Street. It’s not surprising as we have a need to answer to Wall Street analysts who make a very nice living focusing on short-term earnings.

That doesn’t sound very smart long term, no pun intended.

It seems systemic, and it certainly isn’t helped by the accounting conventions. We just don’t put numbers on investment choices or capital choices that might otherwise create more resilient and sustainable organizations. One path might be to ask: “What’s the value that we create in avoiding future volatility and write-downs?

Where should companies begin to look for sustainability-type risks?

One place is the huge risks sitting in everyone’s global supply chain. The company may not ever have a labor issue in China or Bangladesh, but it may have a risk of a water shortage at a key supplier.

How will sustainability define future winners and losers?

HSBC said the clean economy will be greater than $2 trillion by 2020. But there’s a much larger number when you factor in the value of making companies more resilient and increasing their viability and relevance in the face of enormous change. The point is for organizations and the C-suite and boardroom to recognize whether time is on their side and do something to change or shift strategies while possible.

What do you suggest for companies whose core business is anti-fragile or nonresilient?

The solution is to replace earnings that are going to disappear. It’s classic portfolio theory. I think there’s a big pivot story for the oil and gas industry should they choose to invest in research and development on energy storage, on solar, on wind, on bringing the cost down, on scaling. They are great energy producers, so why get fixed on one source rather than many sustainable sources?

You also decry quarterly earnings guidance.

Nothing leads to short-termism more effectively than quarterly guidance. By definition, a pivot can’t take place if you are being tracked quarter to quarter, or only a very small pivot at most. That’s why I admire someone like Tim Cook at Apple, who told anti-environment shareholders to buzz off. He said if they didn’t like his priorities, they should get out of this stock. Google is another firm that has pulled back from the quarterly guidance game.

Tech companies are a breed apart. Are there mainstream companies doing the same thing?

Yes, one of the first things Unilever’s CEO Paul Polman did was stop giving quarterly earnings guidance and others like Walmart or Ford are fully on board on critical aspects of the pivot agenda. It comes down to leadership.

Some of your recommendations suggest working more closely with government. Can business trust the EPA?

Well, if you don’t like the EPA regulating greenhouse gases, I’d support the passage of a tax on carbon, which is about the simplest, cleanest way to do this. The situation now is that it has to be an EPA solution, which is far more complicated. Markets work really well when you price things correctly.

We hear that China is a great polluter and its growth assures this will continue.

I get this question a lot. China’s going in many ways much faster than we are. And, you know, when you ask world leaders and NGOs and others that talk about climate, they say China and the U.S. are the problem, but that the U.S. is the greater problem. They may be right, because China is a unique case. They have set much more aggressive sustainability goals than we have. They’re going to cap carbon, for instance. They built the largest solar and wind industry in the world in six years. Now, the challenge is they’re so big and they’re growing so fast that they’re doing more of everything, like coal and more natural gas and more nuclear. They are the reason manufacturers like Solyndra went out of business trying to compete with solar panels that dropped 80 percent in cost in a few years. But those cheaper panels — like cheaper electronics and other goods that China is focused on — are a benefit for everybody. So I think in terms of setting goals and direction, I’m not worried about China.

India’s a different story. They don’t have the infrastructure or government structure to manage all this very well. I’m most worried about Russia. They are a massive oil and gas producer, and look at their relationship with the rest of the world. They’re a huge emitter. Then you also have to be concerned about countries such as Indonesia cutting down trees. Deforestation produces 20 percent of emissions in the world.

You point out that big data is actually causing a sustainability problem.

In the previous two years our planet stored as much data as it had up until 2003. As a result, now the cloud is the world’s fifth-largest user of energy, behind China, the U.S., Russia, and India. It’s staggering growth. There’s this mad race between technologies that get more and more efficient. There are some very tough conversations going on in the IT community about how accessible does it all have to be. You have to have data centers running, but you don’t need them all going at full speed for data that you may not need for six years. We want more IT, but it has to get efficient at the same time.

Author’s Bio

Jeff Cunningham is an advocate for enlightened global leadership, which he calls the most valuable natural resource in the world.

He is a Professor at ASU’s Thunderbird School of Global Management and was the former publisher of Forbes Magazine, startup founder, digital content CEO, and ran an internet venture capital fund.

He travels the globe in search of iconic leaders. As an interviewer/host, he created a YouTube interview series, Iconic Voices, now co-produced by @Thunderbird, featuring mega moguls from Warren Buffett to Jeff Immelt. His articles on leadership have been featured in the Arizona Republic, LinkedIn and Medium via JeffCunningham.com.

His career experience includes publisher of Forbes Magazine; founder of Directorship Magazine; CEO of Zip2 (founded by Elon Musk), Myway.com, and CareerTrack.com; venture partner with Schroders. He serves as a trustee of the McCain Institute and previously as a trustee of CSIS and Middle East Institute, and as an advisor to the Nobel Peace Prize Committee.

He has also been a board director of 10 public companies.

The views expressed in this article do not necessarily reflect those of Thunderbird School of Global Management or Arizona State University as a whole.