In recent years, sustainability has become a popular buzzword — but it still doesn’t always have a seat at the strategy table. Until that happens, benefits will not accrue to either firms or to society, says C. B. Bhattacharya, a professor of sustainability and ethics at the Katz Graduate School of Business at the University of Pittsburgh, and author of a new book, Small Actions, Big Difference.
In a conversation with Sandra Maro Hunt, managing director of the Wharton Social Impact Initiative (WSII) and Knowledge at Wharton, Bhattacharya explains why sustainability needs to be strategic to a firm’s business and how it can be orchestrated. Bhattacharya says that when a company defines its purpose, it will find that sustainability is built into that definition. And that it is a journey; the important thing is to get started.
An edited transcript of the conversation follows.
Sandra Maro Hunt: Could you tell us how you got interested in this topic?
C. B. Bhattacharya: When I was an assistant professor at Emory University, I met Ben Cohen, the CEO [and cofounder] of Ben & Jerry’s [American ice cream company]. He asked me an interesting question. He said, “We do a lot for the environment and society. Can you help me understand if this helps us sell ice cream?” This was the mid-1990s. I found it a fascinating question. On the one hand, he was talking about how to increase sales and on the other hand he was talking about environmental and social attributes of a product driving sales. Nobody was looking at this at that point in time. I replied, “I don’t know the answer to this question, but I’m going to think about it.”
That started my transition to the field of what we now call corporate social responsibility or CSR. It was the turning point for my career. One thing led to another. There were several articles to be written, several questions to be explored. As I was researching for my last book, Leveraging Corporate Responsibility, I observed that corporate responsibility managers or sustainability managers in companies like Procter & Gamble, General Mills, Timberland and others were very smart, very good people, but they did not have a seat at the strategy table of the company. This struck me as odd and not good for the field. I’d found that it’s only when CSR is treated as strategy does it benefit the firm and also society. I started thinking about how can we on-board the entire organization into this journey of making our companies more sustainable. That’s what the book, Small Actions, Big Difference is about.
Hunt: In your book, you point out errors companies make when thinking about sustainability: one, that bosses delegate it to a single unit rather than integrating it throughout the entire corporate strategy. And, two, that boards believe that unsustainable practices can be solved quickly by change management. Could you explain how these show up?
Bhattacharya: There is a mistaken conception in large parts of the corporate world that sustainability — the well being of our planet and its people — is the next iteration of CSR. This is wrong because sustainability has to do with the survival of the company. It deals with every organizational function, starting from procurement to disposal. Where do our raw materials come from and where do our products end up? Every part of the organization is touched by the concept and actions that have to do with sustainability. That’s why I call it “conducting business through the sustainability lens.” Everybody has to be on-boarded. Relegating it to one unit and producing a sustainability report noting all you’ve done as a company and showing yourself as a good corporate citizen is not sufficient.
Hunt: When a company is doing it right, is there someone in each division that is part of the sustainability team? How do you make sure it’s not siloed?
“It’s only when CSR is treated as strategy, does it benefit the firm and also society.”
Bhattacharya: Oftentimes, there are no sustainability teams as such because sustainability is fully integrated into product development, R&D, branding, human resource management, procurement — all of that. Every team has what’s called “sustainability generalists,” people who may not have deep knowledge of the science of sustainability but who know enough to make business decisions through the lens of sustainability. In some companies, it’s integrated into every business decision from the mailroom to the boardroom. In other companies, there will be somebody from marketing, somebody from HR, and somebody from procurement. They are ambassadors, if you will, to the overall corporate sustainability leadership team. And then they, in turn, cascade it through their respective departments.
Hunt: The second challenge you raise is that it’s not about a change in management or change management; it’s about changing how a company philosophically thinks about sustainability. Could you tell us more about this?
Bhattacharya: In the corporate world, we have this belief that change management can pretty much fix everything. I have seen several organizations that will say, “Well, we can get in a McKinsey or an Accenture to launch our sustainability program.”
That’s all very good, except sustainability speaks to the very philosophy of business and to the philosophy of the corporation. Change management does not do that. Traditional change management initiatives are still focused on how to increase profit, whereas when it comes to sustainability, we have to go beyond profit to think about purpose. What is the purpose of the organization? It is to play a role in society and to be helpful towards the environment to serve customers. It’s a multi-stakeholder concept.
The Business Roundtable [an association of CEOs of America’s leading companies] recently came out with a statement that said, we need to go beyond profits. Larry Fink [chairman and CEO of BlackRock, an American multinational investment management corporation] has been writing his letters on the subject. When we think that a change management exercise can fix sustainability, we are ignoring some important underpinnings of the concept, particularly when it comes to convincing your employees that this is something worthwhile engaging in, rather than being bystanders.
Hunt: For companies that don’t have the expertise in-house, what would your advice be on how to become a more sustainable company?
Bhattacharya: If you don’t know what to do, there are commercial consulting organizations. There are also people like myself and others who work in the field who might be able to help. What is important is that whoever comes in must understand that this concept of sustainability is a different kind of animal. The person needs to take a step back and see why a particular business exists in the first place. For instance, as an energy company, my job is not to sell electricity; it is to keep people comfortably warm or cold or help them do whatever they want to do with electricity. That’s a huge mindset shift. When a company defines its purpose, it will find that sustainability is inherently built into that definition. As long as anyone who comes in to help you out has the right kind of perspective on what sustainability entails and what it would take to change an organization to transition its business model to be more sustainable, I think we are fine.
Hunt: Let’s get into the solutions. Your book outlines three steps. Could you summarize them for us?
Bhattacharya: The three steps of my model are “incubate, launch and entrench.”
In the first step, the leadership team gets together to define the company’s purpose and comes up with a set of concrete goals, issues that are material for their company. In the second step, you unfold the program to the employee base of the company and to other stakeholders like community members, supply chain members, customers and so on. In the third step, you undertake a set of practices that makes acting sustainably or doing business with that lens of sustainability like second nature. In this phase, you provide feedback on progress through metrics and KPIs (key performance indicators). You create a vibrant culture of sustainability in the organization. You expand your sense of ownership so that it’s not just about you anymore, or your company, but it’s about the planet. That’s where we see traditional competitors collaborating to solve what I call “the tragedy of the common problems,” like deforestation or e-waste, that no one company can solve by itself.
Hunt: Is the mission or purpose unique for each company, or do you see companies within a particular sector having the same mission and purpose?
Bhattacharya: Any purpose would have to have a normative component. One should not define the purpose of the firm only so that it resonates with the stakeholders. It has to be something that is true to who you are as a company and what you are really trying to accomplish. It must come from our hearts and minds as leaders and the leadership team. You must then check if it gets the buy-in from employees. If employees understand what we are trying to do, it should be reasonably easy to communicate to the other stakeholders. Otherwise, purpose can get lost, and then it’s defeated.
“Everybody has to be on-boarded. Relegating it to one unit and producing a sustainability report noting all you’ve done as a company and showing yourself as a good corporate citizen is not sufficient.”
Even within the same industry, every company does not have to have the exact same purpose. The purpose of all car companies might be to provide mobility, but that does not mean that somebody cannot add comfort, or speed or the experience. There are definitely ways to change your purpose, to give it certain uniqueness relative to others.
Hunt: You talked about checking with your employees as the first stakeholder group. What does that process look like? How does one test if it’s the right statement for your company?
Bhattacharya: You can do a town hall meeting, an open forum where employees come, you can have Q&A sessions. I’ve seen CEOs lead this kind of a process and it can be quite energizing for the employees. The employees can provide feedback. It can also be done at the departmental level. If the CEO and her leadership team have defined the purpose, you can have different ambassadors go out to their respective teams and find out what people are thinking about it. The main thing is to have buy-in, both externally and internally. The surest way to know if you are on the right path or not is to gauge the energy and the resonance with what you’re talking about.
Hunt: When it comes to social impact issues, sometimes you have blurry edges. Let’s go back to your car example: Is it to get people places? Is it to get them there safely? Is it to do it with the smallest environmental footprint? Is it to do so building community? Is it to do so safely for children, pets and so on? How do companies draw the right line so that they’re not trying to boil the ocean and target 100 different impact dimensions? It can be really tricky to know when to say when.
Bhattacharya: What companies typically do is something called a “materiality analysis.” In simple terms, this is about analyzing what stakeholders and managers think are the most important issues facing the company. The materiality matrix is plotting those on a two-dimensional axis — the importance according to the employees, and the importance according to the stakeholders. Typically, the company will choose those issues which are deemed important not only by the company itself but also by the marketplace of stakeholders. This is important because you don’t want to boil the ocean. You’ve got to prioritize. You’ve got to pick. Because, and this is a quote in my book, “If you don’t focus on something, then nothing gets done.” More than three or four issues can make it very complicated. Or seven, let’s say, in the case of Unilever.
Let’s talk of carbon. Carbon is extremely important for LafargeHolcim, the largest cement producer in the world. But it is much less important for a company like ING Financial Services for whom something like cybersecurity may be much more important. So materiality is one way that we can boil down and distill our goals into concrete, bite-sized chunks and it’s easier to disseminate these goals and priorities to employees and other stakeholders.
“If you don’t focus on something, then nothing gets done.”
Hunt: You talk about employee ownership and about the heart and the head both being necessary. Could you tell us more about that?
Bhattacharya: Ownership is the centerpiece of this whole thing. There are companies that give directives to their employees. “We need to be more sustainable. We need to do this. We need to do that.” But if you do not go through the process of instilling a sense of ownership, then it becomes like going to the gym because I have to go to the gym but my heart is not in it. What ownership does, and this is psychological ownership and not owning something physical, is that it makes the individual employee take responsibility for sustainability, regardless of whether they are in the mailroom or in the boardroom.
To instill this sense of ownership, you have to make an appeal. I call this “enticing” employees to on-board. It’s different strokes for different folks. One argument is that this is the right thing to do. It’s the right thing to do for our planet. It’s the right thing to do for our children. This argument resonates with several employees. The other argument is that it’s not only the right thing to do but it’s also the smart thing to do because this is saving you money. Lisa Jackson, who is the top sustainability person at Apple, said that one of the most fun parts of her job is going to businesses and saying, “Look, this is not only going to save you the amount of metals you use in these products, but it’s also saving you money at the same time. But it’s a nicer saving, because it’s also helping the planet.” So the head and the heart work in tandem.
Hunt: In your book you say, “Sustainable investment takes time to pay off. You will have to spend money to get your house in order, but once the returns start coming in, then there’s no conflict between sustainability and profitability.” Could you talk about timelines? People are typically concerned about how much they need to invest, and when will they see returns in terms of profits, employee engagement and environmental impact.
Bhattacharya: There is no one timeline. It depends on the kinds of initiatives you undertake. In almost every organization I’ve studied, there are low-hanging fruits that do not take long to fix, unless you’re overly bureaucratic. The low-hanging fruits oftentimes have high symbolic value, high signaling value, even if they are not the most intense sustainability activities that you could undertake. An example of low-hanging fruit would be to say, “This is a single plastic use-free zone.” In our office, we do not bring single plastic use bottles. We each have our respective coffee cups or mugs and water bottles. It’s not difficult to do, but it has a tremendous impact on the employees’ light bulbs going off. They realize that their company is taking this seriously.
“When a company defines its purpose, it will find that sustainability is inherently built into that definition.”
Companies could go the next step and say, “We will not have individual waste paper baskets in every office. You will need to go to the common area and segregate your waste into what’s recyclable, what’s compostable.” Not having your own waste paper basket actually makes you produce less waste because people don’t want to keep going to the common area to dispose of it. These initiatives can be done in a three to six month time frame. They are quick, low-cost and high-visibility initiatives. If you want to change your entire procurement system, or install audits at your suppliers, those take a little bit longer to pay off. But it’s a journey, and the most important thing is to get started.
Hunt: Have you also seen cases where companies have had success jumping into big things as their first investment, making a seismic shift in how they do business, and simultaneously capturing that transformative energy?
Bhattacharya: Retail firm Marks & Spencer is a good example. They took a deliberate stand that every time they open a new retail store, it would not be individuals who decide what kinds of lights to order and what kinds of insulation to have. Instead, they have a default option.
Marks & Spencer has tackled some big things in the operations spaces where you do save a lot of energy and emissions and so on. At the same time they realize that in the communities where they have their stores, people will want to also see some outreach from the stores to work with them along with knowing that the store has the latest sustainable technologies. For instance, employing differently-abled people or helping out with some charitable work so that there is that feeling that the retailer is one of us. This is an example of a firm tackling multiple things on the same front.
Hunt: Doing this right seems like a competitive advantage. You get high customer engagement, high employee engagement, and save money. Do companies share what they’ve learned about how to be more sustainable or do they keep it a secret because it is a competitive advantage?
“The cost of inaction is higher than the cost of action.”
Bhattacharya: What you see out there is a mix. Some companies firmly believe that sustainability needs to be put in the pre-competitive space. They collaborate on technologies and on difficult problems like deforestation which cannot be solved by any one company.
Unilever, for example, came up with compressed deodorant cans and they made that technology open-source. Enel, a large Italian electricity company, has made much of its technologies open. In the chemical industry there are behind the scenes collaborations in R&D. A bunch of organizations like Apple, Samsung and Nokia have got together to clean up their supply chain. I’m sure companies do have secrets to be able to play the competitive advantage game but they also realize that sustainability is germane for all of them and they need to work on it together.
Hunt: To write this book, you conducted interviews with more than 100 people from the mailroom to the boardroom in 25 multinational companies. Was there something that everyone commented on? Were there any universal trends irrespective of the sector, role or level?
Bhattacharya: Yes. Everyone thinks that this is truly important and we must do something about it. One thing I learned is that the real stories come out when you move away from the C-suite. I made sure that I spoke with some middle managers and whenever possible I visited factories and branch offices. I wanted to see if this ownership concept that I’m proposing — this buy-in into sustainability, the wholesale employee engagement — is this real or is this something that’s only in the head office. There are some very interesting variations as you move across different parts of a giant company.
Hunt: Could you summarize the key takeaways of the book?
Bhattacharya: The first thing I would say is that the cost of inaction is higher than the cost of action. A lot of folks don’t realize that. The second is that you [as an individual] can always do something — whether you are a CEO, or an employee, or you aspire to work for a company. Leaving the consumer part aside for now, even if we can mobilize a significant portion of that workforce, we get something called “the million man effect.” I would like to leave everybody with this sense that together we are stronger and that small actions can make a big difference. No action is small enough, starting from the mundane act of putting the lights out, to figuring out a way to suck carbon out of the air or finding an alternative to plastic packaging or plant-based burgers. Whatever is in your realm of influence, you have to do it. Being a bystander is not an option anymore. You’ve got to lean in and be an owner.