How to Embrace Sustainable Leadership Practices as an Issuer

Sustainable leadership is a transformative approach to running a business that goes beyond solely compliance and redefines the ethos of how the business operates and engages with both its people and the communities in which it operates. It creates a culture where every employee – from the C-suite to the front lines – is engaged and empowered to contribute to sustainability goals that help the business drive innovation, create a strategic advantage and secure long-term financial performance.  

Financial and non-financial performance are no longer separate. One feeds into the other, especially as the world faces increased challenges across all aspects of ESG. Of the investors who replied to a Morgan Stanley survey, for example, 70% believed that a strong ESG strategy was key to improved returns. But that strategy cannot only exist on paper. It must be lived by all stakeholders in the organisation. 

The challenge lies in inspiring and mobilising teams through sustainable leadership practices, ensuring that the vision for a greener and more equitable future is shared and pursued collectively. This article explores the principles and practices of sustainable leadership, offering insights on how to harness the power of people to achieve lasting environmental and social impact alongside business growth.

What is sustainable leadership?

Sustainable leadership is concerned with helping a business grow to meet its goals in a manner that acknowledges and addresses the environmental and social issues of the world. It is about seeking ethical solutions to problems and developing a company culture that prizes both growth and social responsibility. 

This is a philosophy aimed at a long-term perspective on sustainability. It requires agility to meet the changing sustainability landscape with innovative solutions that benefit the organisation, investors, employees, customers and the world in general. 

Sustainable leadership requires collaboration across an organisation and a clear system of values as a prism through which to make decisions that will achieve the aim of your strategy. 

The principles of sustainable leadership

Long-term thinking

The founding principle of sustainability is that it is a long-term approach. The focus is not just on making short-term gains by any means possible, it is about making decisions to equip the business with the tools it needs to continue growing even when it faces challenges down the line.

A company set up with a short-term strategy can find itself struggling once it has made its initial gains, as the market conditions can shift and there is no mechanism for adapting built in. 

The sustainable leader focuses on the long-term impact and potential market turbulence, creating strategies that will allow the company to create a viable future for itself and its investors. 

Ethical practices

Ethics are essential for sustainable leadership. Social media means that any business that falls below expected standards in the way that it interacts with its environmental responsibilities and how it treats its people can become big news globally very quickly. 

By making decisions in an ethical manner and displaying high standards of integrity, honesty and transparency, companies can build trust with investors and customers, maintaining an ethical reputation. 

A sustainable leader will foster a culture of ethics which can help create a positive internal and external perception, making the company an attractive prospect to work and invest in.

Inclusivity

Diversity is a key requirement today, with the current focus on social justice. Of course, many people think of social diversity in this context, which is important. This means encouraging representation of all genders, races, ages and backgrounds within your organisation and on the board of directors.

However, there is also professional diversity to consider. This includes diversity of experience, outlook, characteristics and personality traits. 

A sustainable leader will seek out varied perspectives by creating an inclusive environment where every voice is valued and contributes towards decision-making, helping the company discover innovative solutions to existing problems and hone its approach for the future. 

Stewardship

Although it is termed ‘sustainable leadership’, it is more accurately described as stewardship. Sustainability is rarely the result of one person’s command. It is more often driven by collaborations between stakeholders, taking a systems-wide view of the different areas of the organisation as a connected ecosystem. 

These measures are inspired by a common purpose, with key stakeholders bringing their individual talents to the table for the greater good of the business. 

Resilience and adaptability

Although sustainable leaders are always looking to understand the forthcoming risks in the long term, sometimes they are difficult to predict and circumstances change without warning. This is why they build resilience and flexibility into their organisations. A sustainable leader will work with flexible stakeholders to ensure the business can pivot if necessary and bounce back from setbacks without too much disruption. 

For example, with the recent cultural shift towards remote working, some businesses have thrived with the ability to carry out shareholder engagement in a virtual space, whilst others have struggled to keep up with the changing expectations of investors due to a lack of adaptability in their workflows. 

Developing people

A future-facing organisation cannot take its people for granted. In order to achieve continuity and to maintain the best talent to drive the company in its sustainable practices, it must invest in developing its people. 

Not only does personal development help employees feel valued, but it improves their self-esteem and belief in their abilities by expanding their skill set. It also equips them with the abilities to deliver bold strategies that help the company meet its goals and head off the long-term challenges that it will meet on the way. 

Developing your team’s capabilities, not only as part of green-skilling but also across the board, is part of the collaborative approach to sustainability. 

Community and environmental awareness

The Corporate Sustainability Reporting Directive requires a double materiality analysis on ESG risks, and this is an area in which sustainable leadership excels. In-scope companies must assess how their actions impact society and the environment, as well as how sustainability risks could affect their performance.

Leaders versed in sustainability will already be aware of this relationship between the business and the wider world. They will prioritise putting in place systems and procedures to reduce adverse impacts in both directions, whilst helping to contribute positive impacts on societal wellbeing. 

Vision and communication

Sustainable leadership requires a vision of how the company will meet its sustainability goals. The company needs to set bold goals and create a pathway towards meeting them, but clear communication is the key to setting this into motion. 

A sustainable leader must be able to articulate their vision and the process for reaching it. They should be able to communicate it both internally and externally so that they can achieve buy-in from relevant internal and external stakeholders to drive collective action.

An ambitious goal is no good without being able to inspire others to see how it can become achievable. 

Best practices for sustainable leadership

Set clear goals

Without something to aim for, your sustainability efforts can easily fall away. Sustainable leadership is all about making long-term plans, and creating clear ESG goals helps all stakeholders understand where the company is going and the steps it needs to take to get there. 

Promote ethical governance

Ingrain a company culture that values, promotes and rewards integrity, transparency, fairness, accountability, teamwork and loyalty. Everyone within the business needs to understand the importance of acting in a sustainable manner and making ethical decisions. Implement a whistleblowing channel for employees to report unethical behaviour so you can stop misconduct before it gets out of hand. 

Inspire your team

Sustainable leadership can only be achieved when the team buys into the process. This requires leaders to engage employees and inspire them to work together for the greater good. Help them understand where the organisation is going, why it is choosing that path and the benefits it will bring to themselves, the organisation, the environment and society in general. 

Cultivate a culture of sustainability

Culture starts at the top, so make sure the board is seen to embrace sustainability in the work it does and the decisions it makes. Create a code of ethics by which all employees are obliged to abide. You can also employ a chief sustainability officer to take the lead on the company’s ESG strategy. This shows a commitment to sustainability, demonstrating to top employees the importance placed on them. 

Create a knowledge management strategy

Sustainability cannot just be the preserve of a small number of stakeholders. To achieve success with sustainable leadership, you must implement a knowledge management strategy that organises and shares the policies and procedures the organisation must implement to be more sustainable. Having easy access to this information helps all employees understand the sustainability measures developed over the years, why they are in place and what must happen to adapt them and build on them for the future. 

Shape your message

A sustainability mission requires clear communication so that all stakeholders are on the same page. Engage your shareholders and explain what you are doing, why you are doing it and how it will drive long-term value for both them and the company. All parties need to understand the reasoning behind your mission and what it will achieve for their benefit.

Measure your progress

Set sustainability goals to keep your progress on track and monitor how successful your policies are in helping the company achieve its mission. SMART goals are specific, measurable, achievable, relevant and time-bound, helping you plot the steps on the road to your ultimate target. Consider the most effective ways the business can achieve sustainability and pick ESG KPIs that will get you there. 

Adapt and learn

Just because you start with clear goals does not mean they are set in stone forever. The environmental and social landscapes can change and continuing on your previous path may no longer be the most effective route to success. Sustainability is about continuous learning and adaptability. Be ready to shift your focus and adjust your goals if that will bring the best possible sustainable future for the business. 

Challenges in sustainable leadership

Examples of sustainable leadership initiatives

Reducing greenhouse gas emissions

Stock exchange Euronext implemented its Fit for 1.5° ESG commitment to deliver significant reductions on its greenhouse gas emissions. Through activities such as upgrading the energy efficiency of its buildings, decommissioning gas-fired boilers and the vehicle fleet, moving office spaces and data centres to renewable energy, and creating a sustainable travel programme for the company, it will reduce Scope 1 and Scope 2 market-based greenhouse gas emissions by 73.5% compared to 2020 and reduce its Scope 3 business travel emissions by at least 46.2% compared to 2019. 

Raising standards of living

Consumer goods company Unilever is committed to improving living conditions for stakeholders in its value chain. It has pledged to help 250,000 smallholder farmers access livelihoods programmes by 2026 and to provide 2.5 million small retailers with access to tools and training to help them grow their businesses. 

Waste management and the circular economy

Sportswear company Adidas has partnered with Parley Ocean Plastic to create footwear produced using recycled plastic. This shows a commitment to reusing, recycling and preserving natural resources, rather than adding to the world’s landfill. The aim is to achieve this through a circular end-of-life solution, known as ‘made to be remade’ (MTBR). The German firm also engages in EU-funded cross-industry circular research projects like Textile Recycling Excellence (‘T-REX’) and the ‘New Cotton Project’.

Upskilling 

German automobile manufacturer BMW employed an environmental officer and has invested significantly in training its employees to align with its sustainability policies. In 2022, the company invested €389 million in training, with 75,000 employees learning the necessary skills to help achieve the organisation’s milestones towards its sustainability goals for the year 2030. 

FAQ

How do sustainable leadership practices impact financial performance?

Implementing sustainability practices can make a business more attractive to socially conscious customers, improving sales. In addition, sustainable businesses minimise compliance and reputation risks that could lead to sanctions or lower sales respectively. By being more energy- and resource-efficient, companies can also reduce operational costs.

How can issuers ensure that their supply chains reflect their commitment to sustainable leadership practices?

Large EU companies will soon have an obligation to carry out due diligence over instances of environmental damage or human rights infringements in their operations and those of their value chain under the Corporate Sustainability Due Diligence Directive (CSDDD). For out-of-scope businesses, it is still recommended to collaborate and engage with your supply chain so that suppliers understand your expectations regarding sustainability. Understanding how suppliers identify, prevent and mitigate risks of this nature should form a part of your tender processes. 

How can issuers balance the initial costs of implementing sustainable leadership practices with the expectation for short-term financial performance?

Phased implementation of sustainability initiatives will spread the cost whilst still showing a commitment to ESG. You might be able to access government grants and incentives to ease the cost implications, too. It also requires strong leadership with a clear vision, communicated to all stakeholders so that they understand the reasoning behind the strategy. Sell the long-term benefits to the company and its shareholders to gain buy-in.