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David Brodwin's blog

Sustainability Skills Wanted

Running a sustainable business requires a unique kind of leadership. It's hard enough to meet quarterly financial targets consistently. To build a sustainable business, an executive must go beyond financial performance to meet goals that center on people (employees, customers, communities) and the environment.

Most large corporations have launched sustainability programs of some sort, and many entrepreneurs are pursuing sustainable business startups. Yet the ranks are thin when it comes to CEOs who show a strong commitment to sustainability while leading a significant public or privately-held businesses. The same names pop up again and again: for example, Paul Polman of Unilever, the late Ray Anderson of Interface, or Jeffrey Hollender, co-founder of Seventh Generation.

The skills of sustainability leadership are increasingly in demand as the economy shifts. Customers care about sustainability; for example, they press restaurant chains to offer meat produced without antibiotics. Employees, particularly millennials, strongly prefer employers that make a sustainability commitment. Insurance companies now take sustainability efforts into account as they underwrite policies for business. And industries that fail to take steps toward sustainability face increasing regulation.

With demand growing for sustainability leadership skills, it makes sense to ask how such leaders are made. How does a CEO acquire the skills to manage the triple bottom line of people, planet and profit? What motivates someone to embrace the greater challenge involved?

Steve Schein, a faculty member in the business school at Southern Oregon university, has explored these issues, and published his research in "A New Psychology for Sustainability Leadership." Schein interviewed 75 executives, mostly senior execs in multinationals. Some of these were CEOs; others held leadership roles in their company's sustainability initiatives. Two factors differentiate sustainability leaders from others. The first involves their problem-solving and management style, and the second involves their values and motivation.

Sustainability leaders stand out in their "capacity to consistently integrate mentally the social and environmental connections with the financial bottom line," says Schein. "They can simultaneously hold complex ecological and social perspectives in their minds while operating in the predominantly short-term economic culture of their companies."

Sustainability leaders are systems thinkers: They recognize the complexity of things, and they see the interdependence among many disparate parts that make up the whole. That leads them toward a management style that is collaborative, that welcomes contributions from many different perspectives. It's the opposite of a command-and-control approach.

This conceptual framework and leadership style is well suited to fast changing, unpredictable market conditions that require flexibility and innovation. It's a good fit with the expectations of the millennial work force. So the skills that a prospective leader needs to cultivate for managing a dynamic business in the 21st century U.S. economy will equip him or her to deal with the specific challenges of sustainability, and vice versa.

The second hallmark of sustainability leaders is an awareness of – and commitment to – environmental values. Schein calls this an "eco-centric" worldview: "They see themselves as not only members of their community, company, or country, but as global citizens, and in some cases as human beings among many thousands of species on earth."

The eco-centric world view develops over time, and often it starts with a powerful experience dating to childhood or young adulthood. Some sustainability leaders spent a lot of time outdoors as children, farming or in the wilderness. Others served in the Peace Corps or a similar setting where they witnessed the ravages of extreme environmental damage or extreme poverty. From these early experiences they developed values and a sense of identify that inspire their work in business today.

The sustainability of our businesses and the sustainability of our planet require similar leadership skills. Our educational institutions can do more to prepare the next generation of environmental leaders. Schein says it will help if students in K-12 get hands-on experience growing food. Whether in school gardens, greenhouses or orchards, growing food instills systems-thinking and creates "a basic level of ecological awareness and a greater sense of community."

Schein further recommends that the basics of environmental science "be interwoven with the business curriculum at the undergraduate and graduate level." Understanding what it takes to manage a forest so it produces timber in perpetuity is a powerful lesson for business. It builds an appreciation of the value of stewardship over assets, and a healthy appreciation for the limits of discounted cash flow analysis. The principles that govern ecosystems in the wild can help us build better and more durable businesses.

David Brodwin is a co-founder and board member of American Sustainable Business Council. This article appeared in U.S. News & World Report September 10, 2015.

Taking Responsibility? I'm Lovin' It

The National Labor Relations Board issued a controversial ruling this week that gets to the heart of corporate responsibility. The ruling raises the bar for the treatment of corporate franchise workers or contractors, and it has already provoked complaints from big franchisers and their trade associations. But the rule will likely help a wide range of businesses and provide some benefits to the economy as whole.

Contracting or franchising is a widespread practice. McDonald's, for example, relies on franchisees that employ workers to serve food. Silicon Valley tech giants hire contractors to shuttle staff from home to office, and these contractors hire employees to drive. Hotels contract with cleaning companies that hire workers to change the sheets. In all these examples and many more, an indirect employment relationship exists.

In its ruling, the NLRB said that many such workers are "jointly employed." In effect, they said that if it walks like duck and it quacks like a duck, then it's a duck. If an employee works under a McDonald's sign, wears a McDonald's uniform, serves a menu set by McDonald's and follows procedures defined in a McDonald's manual, then that worker is at least partly an employee of McDonald's even if her paycheck says "ABC Food Service of Kansas City."

Once the employee is declared a "joint employee," the parent company becomes partially responsible for employment practices: making sure the minimum wage is paid, making sure the workplace meets safety requirements, and so on. One of these requirements is that when employees vote to form a union, the company must negotiate with the union. Since unions have become something of a popular whipping-boy, much of the media coverage has focused on this aspect, even though it is a small part of the story.

Let's acknowledge that the franchise system and the use of contractors is important in our economy. It creates entrepreneurial opportunity for individuals who otherwise couldn't start a business, and it creates operating efficiencies by letting companies specialize in what they do best, and contract out for the rest.

But like every good thing, these structures can be misused. The problem is greatest when a huge and powerful parent company puts pressure on a franchisee or contractor that is small and lacks negotiating power. When this happens, the franchisee often has no choice but to violate employment law or lose its franchise. Rules get broken, employees get hurt and the franchisee gets fined – but the parent corporation has no responsibility.

The NLRB ruling corrects this, and it puts in motion a principle that extends beyond employment. The notion that a parent company may be responsible for misconduct by a franchisee or contractor can apply to product safety or to groundwater contamination. A core principle of our economy is that business owners do what they can to make their businesses succeed, and they take responsibility for the outcomes of their decisions. The NLRB's decision puts responsibility back where the decision-making power lies.

While big franchisers are complaining, the NLRB's decision actually helps many businesses, and it helps the economy in several ways. The current system gives an unearned advantage to national chains at the expense of locally owned and independently operated businesses: It allows the chains to reap the economies of scale while dodging the associated liabilities. The ruling may hurt some big chains, but it will benefit other businesses to the same extent; the net impact on jobs and the economy will be no worse than neutral.

But it could well be better. Improving labor practices will likely have a net positive effect on employers and on the economy as a whole. Many companies have found that by paying employees a little more and treating them a little better, they gain more in productivity than they spend in direct costs. Eileen Fisher is one example. Uncommon Goods is another.

When franchisees are pushed too hard, they shift their costs from the corporate sector to the public sector. These costs don't just vanish. Examples include greater need for income supplements of various kinds (like food stamps), and greater health costs as uninsured and under-insured contract workers turn to public emergency rooms. These public costs ultimately raise tax rates, and they hurt business and consumers alike.

The NLRB decision will be hard fought in the courts and in Congress. If it survives, it will help restore a balance that has eroded as the economy has become more complex. This will help business as well as workers.

David Brodwin is a co-founder and board member of American Sustainable Business Council. This article appeared in U.S. News & World Report August 28, 2015.