Lead, Follow, or Get Out of the Way!

Pathways to Action: How Keystone Organizations Can Lead the Fight for Climate Change

Peter McAteer

290 pages, Anthem Press, 2022

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How can we tackle the problem of accelerating change? Pathways to Action: How Keystone Organizations Can Lead the Fight for Climate Change is organized around three fundamental principles. The first is we are moving too slowly on climate change: public and private sector actions are not aligned with the scale and urgency of the challenge, and we are likely to miss the global targets for 2030 and 2050. The second is that “keystone organizations”—market leaders that define a competitive space and are capable of excellence—sit atop greater opportunity than others, and must become drivers of change. Nothing will change an industry faster than a market leader finding competitive advantage in sustainable behavior. The third is that there are four pathways to action that are proven to work in accelerating the pace of change. Each can produce results. Any two of these pathways in combination adds leverage, but when all four are working together in common purpose, we can see and feel the impact of accelerating change. The connecting thread is leadership behavior.

The book does not discount new technology innovation, the value of broad-based advocacy, or the challenges of legacy transitions, but rather advocates for a set of organizational behavior principles, when rigorously applied and adapted to each business context, can help organizations reduce risk, find opportunity—and above all—move faster.—Peter McAteer

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The phrase “lead, follow or get out of the way” is attributed to Thomas Paine, but has been used by many including military leaders such as US general George Patton and business leaders like Ted Turner, founder of the CNN news network. If you sit atop a keystone business in an industry critical to climate change, that message is for you. You need to decide if you will lead the way to a sustainable future or get out of the way and let someone else do it! Moving slowly simply means you are a barrier to change, and your board, investors, and partners must take the step of replacing you with a progressive leader committed to action. Change leaders are the essential tool for creating Pathways to Action. My experience in change leadership over the past 40-plus years suggests that leaders need to focus their energy on specific “levers of control” that expand their influence and accelerate followership. Typically, these levers include:

• Communicate a new vision. This action sets a course and direction, and the leader may introduce a new business model, value proposition, or roadmap that makes the vision come to life for the organization. Speaking, reflecting, answering questions, restating, and paraphrasing the vision are part of a process. These are not activities to be done if time is available, but must be seen as a core part of daily leadership activity. All senior leaders must be aligned and vocally supportive. Communication is also embedded in a leadership style that is participatory and inclusive where leaders understand how to encourage engagement.
• Develop a collaborative culture. Culture is the enabling foundation upon which trust is built. A sustainable business culture is different in that it is ecosystem and community focused and highly collaborative. It creates the environment where values-based decision-making thrives. Culture can also shape new mental models by reinforcing cultural themes in social rituals and business practices that encourages active voices throughout the business ecosystem. It enables the agility necessary to adapt a strategy to changing conditions, which is a source of competitive advantage. A sustainable business culture, above all else, is characterized by a deeply held, shared belief system.
• Make key hires based on a passion for sustainability. The senior leader is hands-on with key hires because new talent will infuse the organization with fresh ideas and practices consistent with the new vision. Talent development must become a key part of the leadership portfolio to accelerate sustainable change. Sustainability is unlike many other transformation issues in recent decades like Six Sigma or reengineering in that it has a deep foundation in personal values. Hence, hiring for passion is easier and pays big dividends. Research shows that highly motivated employees benefit the most from training and development so finding alignment between personal values and the organizational vision is important. Making key hires is also an opportunity to leverage diversity within the organization and is frequently found in sustainable best-practice organizations. Group decision-making is often a hallmark of participatory cultures and benefits from multiple perspectives and life experiences.
• Use integrated reporting to inform capital allocation. The allocation of funds and resources is done to support the organization’s changing priorities as it transforms into a more sustainable organization. Integrated reporting refers to a practice of reporting on six types of capital to include financial, human, social, manufactured, intellectual, and natural. Reporting is also future-focused and holistic in that it includes information across all business lines and key dependencies. By understanding how the organization interacts with different types of capital, the leaders can get a better view of how value is created, preserved or destroyed over time. Solutions that can accelerate climate action need to be effective, but also economically viable and scalable. The simple act of incorporating natural capital in discussions of financial capital makes a big difference. It tends to reframe and focus the dialogue.
• Embed values in decision-making. This may be the most important issue of all. The issue of embedded values is central to almost all ideas about balancing outcome value. Ideas like impact-weighted accounting, Integrated Reporting and climate-related disclosures all attempt to describe the impact of business activities in areas of natural capital and social impact that are challenging to quantify. In the simplest terms, we need leaders to have a basic set of questions that guide decisions. Are we doing the right thing? Is there an option that is more sustainable? Can we make our products so they have less impact on the environment? Have we considered end-of-life issues when we design a new product? Shared beliefs, based on the principles of sustainability, need to become core to all decision-making processes. A bank would not make a loan without a risk assessment. Businesses should not develop products or deploy capital without a similar filter based on sustainable company values.
• Teach, coach and mentor. A leader who takes the time to teach and lead discussions allows ongoing and direct contact with key staff and provides a role model for others. This is part of the concept of “leading from behind,” where the leader encourages dialogue, promotes risk-taking, shares success stories and connects key events to the business vision. Teaching also allows the senior leader to reinforce values-based decision and put information into context. Why did we make that decision? What were our alternatives? Are we consciously making reasonable trade-offs to create long-term value? Values don’t exist on pieces of paper. They are expressed in the ways we act and interact. Engaging in discussion leadership helps reinforce both good results and the values framework underlying “how” they were achieved.
• Change and integrate key practices. Like key hires, changing a few key practices provides models that activate the vision. It should be remembered that while we are undergoing a transformation to more sustainable businesses, we are also undergoing a revolution in technology and automation. The World Economic Forum estimates that we may displace 85 million jobs worldwide by 2025, while creating almost 100 million new ones. Leaders must set the tone and describe new practices that require sustainable values in decision-making. Cross-functional integration of sustainable values is achieved through the participation of managers who help design the decision-making processes and who model and reinforce the changes with their teams. This helps anchor both the process and the participatory decision-making in the company culture. All of this collaboration is not just for show. It is part of building the agility the organization needs to rapidly adapt to changing technology and new business practices.

Take Responsibility for Your Full Value Chain

One of the first challenges for our keystone leaders is to understand their area of climate change responsibility. The term paradigm shift was first used in 1962 by Thomas Kuhn to describe a fundamental change in our assumptions about a given challenge. This is what is currently happening with business models and assumptions about social responsibility. Keystone change leaders must think beyond the legal boundaries of their organization and take responsibility for their complete value chain. This small but fundamental principle is critical to the change process.

The people at Levi Strauss and Company offer a useful illustration. More than a decade ago, Levi’s started a process of examining how the company could become more efficient in its use of water. Water is a key component of the apparel manufacturing process. The reasoning was that if climate change continues, access to clean water may become restricted and pose a challenge to the company’s growth.

To get a full picture, the company had to think outside its own manufacturing processes to consider growing the cotton and making the cotton thread and the dyes for coloring the jeans. To do that, Levi’s needed to think through the activities of their suppliers, and the suppliers of suppliers. What happens when you calculate all of the water used within the complete value chain for creating a pair of jeans? What happens if you go even further and think about how the customer uses the jeans after purchase? How often are jeans washed during their useful life? What happens to the jeans when they are ready for disposal? These new boundaries are a “birth through death perspective,” and not just a “within the company walls” perspective. In doing this, the company had to reach out to a great number and diversity of people to provide information and perspectives. If you ask your team to solve unique climate problems, you may need to redefine the boundaries of accountability? When you do, where do they get the insights to handle this new challenge?

At the conclusion of this process, Levi’s realized that the average pair of jeans consumes 3,000 liters of water during its life, and potentially more if the wearer keeps that pair of jeans a long time. If the leadership had only looked at the question from a “within the company walls” perspective, they would have seen only 6 percent of total water usage. So, thinking from a full value chain perspective allowed Levi’s to realize the true opportunity to have an impact for the planet: 49 percent of water use was related to growing the cotton, the core component of their product, and 45 percent of water use was related to washing the jeans after purchase.

Moving the boundaries of inquiry and considering a more diverse range of perspectives allows a keystone leader to see the full landscape, or ecosystem, they must influence. For Levi’s, this led to many experiments; for example, putting recycling bins in their stores where customers could dispose of their worn-out jeans. Recycled denim, it turns out, can reduce the front-end water use from growing virgin cotton and save the business money. Levi’s also developed experiments to educate customers about how often to wash jeans to reduce energy and water use. In taking responsibility for an entire value chain, the keystone change leader is able to engage with multiple ecosystem partners. This new “mental model” opens up a host of new challenges and greatly enhances impact.

Adopt a New Business Model

One of the biggest challenges for any change leader is to get people to think differently. One tactic is to propose a different business model as a framework for critical thinking. Using the example described earlier, this may involve adopting a circular economy model. Alternatively, a keystone leader may implement a strategy that decouples emissions from growth. Advising people that the strategy to be implemented will substantially reduce emissions while sustaining growth may be met with skepticism, especially by those responsible for innovation and business growth. However, such changes must be made, and it is the role of the leader to help partners within your ecosystem see how new models can be a pathway to success.

The market has seen a lot of new business models and concepts emerge in recent decades, such as the Network Effect, Software as a Service (SaaS) and business ecosystem. Sustainability asks a business to consider ideas of social and natural equity, as well as resilience, and long-term value creation in its business decisions. Each of these, as well as other principles, like transparency and integrity, may be added to business efficiency in the use of raw materials. Each helps to define the practices that define how the business model operates. For example, a business may declare its intent to “decarbonize” or “disconnect” its rate of growth from its emissions output. In tandem with this initiative, it may want to minimize or repurpose the waste generated in the supply chain. How a business characterizes these objectives and how it measures success is important. Are the objectives expressed in terms of long-term value creation? Is there a respect for pursuing social equity and natural capital? Leaders must help transform these concepts into common language for all to understand. Almost all of the newer business models attempt to reconcile the evolving principles that promise greater balance and equity in value creation.

The keystone leader’s role has a new duality; first, to serve from the front as the visible champion of change; and second, to serve in ways often characterized as “leading from behind.” This means encouraging and supporting the organization as it changes behavior. Leaders must mentor change champions and remove barriers to change that allow the organization to scale while supporting the new principles of governance.

The communication of a new business model, in an era when our understanding of how things work in a sustainable business is evolving, places a premium on leaders as enablers at all levels of the organization. Declaring that your business will operate according to a different business model puts the leader in a bit of a box. Uncertainty brings risk, but it also opens the door to opportunity. Business ideas like circularity and accountability for indirect emissions sounds great, but they are difficult to accomplish in the short term. As such, they are more of an aspiration at the moment that requires a lot of thinking, experimenting, and planning. The role of keystone leader requires both vision and commitment to long-term action, and it requires a constant hands-on presence in the evolving stream of innovation, learning, and communication. As author and consultant Peter Drucker once said, “You cannot predict the future, but you can create it.” For keystone leaders, it’s a hands-on role.