Blog post

Business Leadership in the face of Climate Change

By Orla Kelleher - 30 November 2021

In the wake of COP26, UN secretary general Antonio Guterres is reported to have said that COP26 climate pledges were a compromise that took important steps, but the "collective political will was not enough to overcome some deep contradiction. We are still knocking on the door of climate catastrophe”. This is confirmed by the August IPCC 2021 report which recommends that unless immediate, rapid and wide-scale reductions in greenhouse gas emissions occurs, limiting global warming to 1.5 or even 2 degrees Celsius will be beyond reach. 

It is not a question of whether or not we need to respond to climate change but when, and to what degree, given the narrow window of response time available. On a national policy level, the increasing strategic focus on Clean Growth, Green Economy and the recent launch of the UK Net Zero Strategy prior to COP26, means that sustainability is a crucial imperative for all business leaders. So what are some of the challenges business leaders face in light of this urgent need to address sustainability? Orla Kelleher, Senior Lecturer in Responsible Management at the University of Derby, investigates.

The business of addressing sustainability

Given that a rapid and major course correction is needed, a fundamental ‘in-house’ review of how businesses are operating is required. This can involve realigning the core purpose, values and strategy of a business and reviewing how it operates to ensure environmental sustainability is embedded across all aspects of the business. In essence, getting one’s own house in order first.  

In recent decades, this entailed the growth of new emerging roles such as CSR directors, Chief Sustainability Director/Officers, Global Sustainability Operations, HR Directors and Corporate Sustainability Consultants. However, more recently the need for embedding these skills across all aspects of the business has become evident. According to the State of the Sustainability Profession (2020) report, instead of hiring one sustainability professional to oversee all aspects, businesses are starting to require all employees to think sustainably.

All functional areas now need to make decisions and take actions with sustainability in mind, such that having the ‘Green Gene’ will be essential for any role (Green Biz, 2020). This is necessary to achieve a sustainable business model which shifts away from the traditional shareholder value model, towards the creation of a sustainable business value proposition which includes environmental sustainability (and ideally social responsibility) and addresses how the business will practically design, deliver and report on sustainable value.  

This calls for business model innovation, dealing with complex and evolving sustainability issues and often involving multiple actors and partners with different interests. A compliance approach will not achieve ambitious goals such as Net Zero in the timeframes available, so it will require a fundamental shift in mindset and the willingness and vision to innovate and collaborate. This makes sustainable leadership essential to reaching the ‘new normal’. If businesses do not invest in sustainable leadership, they will lose the ability to compete and adapt to a global sustainable economy within a critical threshold period.

The consequences on no action

Equally, if they fail to adapt to these new requirements, they will be party to exceeding ‘safe limits’.  According to projections, business ‘as usual’ will lead to temperatures between 3-4 degrees Celsius by 2100, as opposed to 1.5-2 degrees Celsius above pre-industrial levels ‘safe limit’ as defined by the Paris Agreement (2015). This indeed is the aim of the newly agreed COP26 Glasgow Pact to keep limiting global warming to 1.5 degrees Celsius "alive" or within reach, in the face of a huge gap between the action countries are taking and what is needed to meet the goal. So it calls for responsible leaders who have the awareness, creativity and wisdom to act morally and ethically in a time of global crises and the ability to innovate and collaborate in new ways.

As businesses start to do this, the next challenge they may face is how to address the systemic changes and the partnership issues required in so doing. To illustrate this, Dr Fred Paterson from the DeCarbonise project at the University gave this example: The DeCarbonise team was working with a demolition company who wanted to reduce its carbon emissions and, as a first step towards this, identified that switching from diesel to bio-diesel in its fleet would help reduce emissions. However, when they investigated how to practically implement this, it seems bio-diesel refineries are predominantly EU-based. Add to this the negative implications of transporting fuel across the continent and we quickly see how a viable solution can suffer from wider system challenges in meeting demand for alternative energy sources. It seems that while investment has been focused on technical and green supply innovation, the issue of demand adaptation and scalability of solutions is now pressing.

Changing together

According to Sally Uron, CEO of Forum of the Future "System change happens when the goals of a system alter, when new patterns of operating emerge, and when new relationships and connections are formed. This is what is happening now in the energy system, shifting in front of our eyes, from a fossil-fuelled system to one powered by renewables".  This concept of systems-wide change is an emergent paradigm for business leaders in terms of practice and requires a shift in mindset, values as well as collaborative capability.

According to Barker et al (2021) “Effective systems-level change requires a sense of interconnectedness and shared sense of purpose to operate for the long-term benefit of society. However, it must begin with personal leadership evolution”. Additionally, systems-led change can often involve a blend of top-down and bottom-up or grassroots leadership and encourages an ego-less, fluid intentional approach to systems-led change.

If we are to respond to the converging global crises, inside of a living system where these issues are inherently interconnected, this may well cause a shift in the business world from individual competition to catalyse new collaborations of stakeholders (businesses, government, consumers, investors, etc).  

To give a more recent UK example, Simon White, Executive Director of Adult Social Care for Surrey County Council says:, “The vision for the future and the ability to deliver it rests with us, working as a system”. Indeed, this was the premise of the 2015 Paris Climate Agreement and the convening of over 200 world leaders at COP26. However, in light of the Glasgow Pact, while the COP26 climate talks have agreed to get countries to strengthen their emissions-cutting targets for 2030 by the end of next year, much depends on how the countries honour those commitments. It will take the combined effort of society, businesses and governments at all levels to ensure we address the large chasm between where we are now and where we need to be to reach Net Zero.

So, for businesses, the focus on developing responsible leadership is going to be central over the coming decades. Bearing in mind, that responsible leadership (as distinct from management) is defined as standing up for what one believes is right and taking responsible action.

Bearing in mind that a responsible leader needs to be ethical and values-based, understand the interdependencies of the system and be able to build long term relationships to effect sustainable development (Muff et al, 2020).  

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About the author

A head shot of Senior Leadership and Strategy Lecturer, Orla Kelleher standing by a bookshelf

Orla Kelleher
Senior Lecturer in Leadership and Strategy

Orla is a Senior Lecturer in Leadership and Strategy, who works in the Executive Education and Enterprise Development Department of the University's College of Business, Law and Social Sciences.

Email
o.kelleher@derby.ac.uk
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