Greenhouse gas emissions.
Water consumption.
Diversity and inclusion statistics.
Pay equality.
Child or forced labor practices.
Training investment.
Innovation investment.
Economic contribution, including community investment.
The World Economic Forum suggested some of these metrics for companies to align their traditional financial reporting against how much they are contributing to the welfare of the environment, and society.
Where should business leaders start? All of these topics are important and not investing in any one could lead to disengaged employees and result in poorer customer experience. This ultimately impacts the perception of the company’s brand in the marketplace and value in the investors’ eyes.
The task of making sure that the business is doing everything right by these metrics may seem insurmountable. But the most important thing is to take the first step. First, be transparent about where the company stands on these issues and set targets as to what needs to be done. This exercise may reveal some uncomfortable truths about operations. But this also shows your stakeholders — employees, suppliers, and investors — courage and intention to do better.
Paul Polman, former CEO of Unilever, whom I wrote about in The Altruistic Capitalist, engaged with Oxfam to study the gap between the company’s labor rights policies and the reality for workers in their supply chain in Vietnam. The resulting report revealed embarrassing issues on fair wages and working conditions. Instead of shoving the report under the rug, Polman was transparent about the issues that his team needed to solve.
Indeed, his vulnerability to be open about these issues enabled him to set the agenda to solve the issues and rallied his team together. Three years after the initial report was issued, Oxfam reported marked improvements in the company’s supply chain policy and practices. By being transparent, Polman gained the trust of his stakeholders.
“Without courage, we cannot practice any other virtue with consistency. We can’t be kind, true, merciful, generous or honest” — Maya Angelou
Second, revisit the company purpose and adjust the culture to fit with the purpose. Kim Scott, author of Radical Candor, believes, “Relationships may not scale, but culture does.” Let’s assume the team decided that a culture based on empathy will increase its ability to develop solutions to tackle its environmental footprint and improve its inclusion practices. A pillar to solving complex problems is understanding, which could involve adopting another’s perspective. Satya Nadella, CEO of Microsoft, said, “Innovation comes from having a deep sense of empathy”.
Now that the culture has been determined, each manager needs to live out this culture in authentic and observable behavior. In an empathetic culture, a manager could practice active listening or seek and consider different ideas. These practices should be performed thoughtfully rather than a task to be mindlessly completed. People know the difference! Direct reports learn from their managers. When the right authentic behavior is picked up, the team mirrors the behavior to others they interact with thus scaling the culture.
Third, some of the existing incentives and processes would have to change. As someone who worked in innovation, I am familiar with the challenges of obtaining a budget for new technology projects that require more than one year or has a longer gestation period to see the fruit of labor. Returns on investments in training, innovation, and community are indirect and less predictable than investing in a new factory or marketing campaign. Employee incentives and budget processes should be tied in closely with the broader agenda to avoid frustration.
When the team is aligned on where the company stands and on its culture, they can start to discuss the changes in the incentives and processes. The initial alignment that may take time will be worthwhile when solving the more complex problems of climate change and inequality.
