5 Reasons It’s Time to Use the Sustainability Risk Stick

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I’m screwing up as a sustainability champion. For fifteen years, I have been writing and speaking about how corporations can capture the 4 carrots of emerging business opportunities, while reducing their negative environmental and social footprints.  The good news is that, for whatever reasons, some businesses are making incremental progress on their sustainability agendas. The bad news is that not enough firms are making enough progress, fast enough, to get to where they need to be―and to where my kids and my grandsons need them to be. I’ve decided to click into a different gear and to lead with a “burning platform” of environmental and social risks―the stick―that businesses must mitigate if they want to be fit for the future. There are 5 reasons that it’s time for me―and perhaps other frustrated sustainability champions―to change tactics.

1. Leading with the 4 opportunity carrots isn’t working

The business justification for sustainability-related initiatives―in fact, for doing anything in business―has 4 opportunity-related carrots.

1. The values-alignment carrot: it’s the right thing to do; aligns with company values, purpose, and mission
2. The employee-engagement carrot: engages employees, which leads to higher productivity, innovation, and profits
3. The profit-improvement carrot: builds brand and reputation; increases revenue; reduces costs
4. The market-performance carrot: enhances share price and market value; lowers the cost of capital

These are great carrots. They are all valid and credible drivers of sustainability, as shown by my research and the excellent Project ROI Report published this month. There are also business case simulators that help executives tailor and monetize these upside benefits for their specific companies. However, individually or even in combinations, it seems that the 4 opportunity carrots are often not compelling enough to accelerate the required dash―versus a leisurely stroll―toward the sustainability finish line. I have concluded that we’re introducing the carrots prematurely in conversations with business leaders. To get executives to sit still long enough to listen to what’s in the pot of gold at the end their sustainability rainbows, we need to first get their attention.

2. We do not have executives’ attention

The anecdote about the farmer and his mule reinforces this point.  A farmer’s mule did everything the farmer nicely asked―started, stopped, turned, sat … everything. After observing this impressive behavior for a while, the farmer’s neighbor asked if he could buy the mule. The farmer agreed, but within an hour the neighbor returned, complaining to the seller that the animal had simply stopped in the field and would not move. It ignored all commands, no matter how softly or loudly given. (The beast couldn’t even be enticed to move with a bunch of carrots dangled in front of his nose.) “No problem,” said the farmer. He picked up a two-by-four, walked over to the mule, and gave it a two-handed wallop on the head. Then he quietly asked the mule to sit.  The startled mule immediately sat down. “He obeys,” the farmer explained, “but first you have to get his attention.”

Executives tend to stubbornly cling to the status quo. To get their attention, we need to use a business-relevant two-by-four.

3. We haven’t stressed a business-relevant “burning platform” of sustainability risks

In the literature about change, the “burning platform” image is frequently used to emphasize the need to exploit the fear factor when convincing others to change. The metaphor comes from a real-life incident. Around 10 PM on the evening of July 6, 1988, there was an explosion and fire on the Piper Alfa oil and gas platform in the North Sea. There were only 63 survivors from among 200 people on the platform. Some workers jumped, plunging from the 15-story high platform to the icy, debris-laden, flaming North Sea below. The jumpers knew that they could survive only 20 minutes in the freezing water, if they weren’t killed by the fall. They still jumped.

When one rescued survivor was later asked why he jumped, he replied that he chose uncertain death over certain death. (He didn’t jump because he woke up and had a sudden urge for a personal growth experience or a midnight swim.) He jumped because he had to. He wanted to. He was driven by fear.

From my experience, over 80% of business decisions are risk-based―the fear of inaction is too great to ignore. Upside-opportunity carrots are then used to retroactively rationalize and positively re-frame the decision, but it was the fear of staying on a “burning platform” of risks that provided the initial attention-getting two-by-four stick.

Environmental risks are not only endangering bears, bees, and bunnies―they’re endangering businesses. We’ve done a poor job of connecting those dots. Fortunately, the World Economic Forum (WEF) “Global Risks 2015” report helps us do that. It identifies 28 risks that could do major damage to large economies―that is, countries and corporations―if they are not ready for them. Several of the environmental risks (e.g. extreme weather events, failure of climate change adaptation) and social risks (e.g. the water crisis) are in the category of risks that have the highest likelihood of happening within the next ten years and the highest impact on businesses when they do.

The perfect storm of global environmental and social risks on the horizon, identified by the WEF, provides us with the “burning platform” of business-relevant risks―in general. What’s missing is tailoring the metaphor to a particular company’s situation.

4. We haven’t identified company-specific “burning platforms” of sustainability risks 

Enterprise Risk Management (ERM) uses gap analysis to manage priority risks. If companies are to avoid the subset of sustainability issues that could do them the most damage, they need to to do a gap analysis so that they can prioritize their efforts to close the gaps between current performance and desired performance on its most material sustainability goals. Gap analysis requires clear metrics for the desired future state. Until now, we have lacked a rigorous definition of the ultimate level of environmental and social performance that companies must attain if they are to mitigate the impending “burning platform” of business-related risks.

The Future-Fit Business Benchmark (F2B2) provides that goal line. Its 21 science-based, quantified goals define how well a company needs to perform to mitigate the impacts 16 pressing environmental and social issues identified by the WEF, KPMG, and others. When released this fall, F2B2 also will provide key performance indicators (KPIs) by which companies can assess the gap between where they are and where they need to be if they are to be future-proof on each environmental and social issue. Then, using the Sustainability Accounting Standards Board (SASB) Materiality Map and other guidance, businesses can focus their efforts on the performance gaps that are the most urgent / material / relevant to companies in their industrial sectors.

The gap analysis of the company-specific “burning platform” of sustainability risks provides the driver. It makes the risks personal. Wham!

5. We’ve been throwing our punches out of sequence.

We know that we can do what needs to be done to create a sustainable world and thriving, future-fit businesses. We have the technology. We have the tools. We can do what needs to be done to meet the F2B2 goal lines. What’s lacking is the collective will to make the necessary transitions. We need leadership from the most powerful human force on the planet―the corporate sector. If corporate leaders want to do it for self-preservation reasons, they will make it happen.

So, it’s time that we tried a different one-two punch combo. First, sustainability champions need to help companies identify their company-specific “burning platform” of sustainability risks, using the above F2B2-enabled gap analysis. That’s the stick that gets executives’ attention. Then, companies will proactively take steps to mitigate the most material gaps, and reinforce the wisdom of their decision with a company-specific quantification of the 4 opportunity carrots that emerge when their sustainability performance mitigates their risks. Those co-benefits seal the deal.

Maybe we’ve been holding back on the stick because we are nice people who think that all business decisions are rational and objective. They’re not. We’ve underestimated the fear factor. It’s time that we admitted that using the opportunities-then-risks sequence is not working well enough or quickly enough. Maybe a tailored risks-then-opportunities sequence will help us scale our efforts as sustainability champions, for the sake of companies’ future―and our families’. It’s worth a try―and avoids us re-validating Einstein’s definition of insanity.

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Bob