Sustainable Leadership: Talent Requirements for Sustainable Enterprises

There’s an urgent demand for a new type of business model—one that makes the long-term sustainability of our world a top priority. And that requires a new type of leader—a sustainable leader.

Despite a decade of this need being clear, organizations are still grappling with making sustainable leadership a reality. So, in this report, we delve into the key competencies of sustainable board members, CEOs, and executives, and how to assess and develop them.

Why do we need sustainable leaders?

Political institutions can’t solve complex, transnational issues alone. Pressures on natural resources, climate change, regional instability, access to healthcare and education, social disruption, and technological change will all require action from businesses as well.

To step up to the challenge, organizations need sustainable leaders who can balance short- and long-term priorities.

And while global threats highlight why sustainable leadership is the right thing to do, data shows it’s also good for business. Morgan Stanley has shown that, despite a slight underperformance in 2022, ESG investments have delivered greater returns than traditional funds over the last five years. That’s because recruiting and developing sustainable leaders drives growth as empowered consumers choose brands that reflect their values and activist investors use their financial might to do good.

Key competencies of sustainable leaders

Sustainable leaders must meet basic competency requirements for leadership, such as creating and communicating a vision, leading teams, developing people, making decisions, and delivering results. But our research with the United Nations Global Compact showed there are five differentiators of sustainable leaders, which formed the RRA Model of Sustainable Leadership:

Sustainable mindset

This sustainable mindset is the purpose-driven belief that a business’s commercial activity is inseparable from the wider societal and environmental context. Sustainable leaders have an intense sense of this purpose that grows into a stronger sense of mission when part of an ambitious organization.

Sustainable leaders know that to be successful in the long term, they must work toward ESG outcomes and align all aspects of running their organization with this core belief.

Multi-level systems thinking

No company or industry can solve systemic challenges alone. Each must work out how to address these complex issues in collaboration with other businesses, civil society organizations, academia, and governments.

Sustainable leaders are adept at systems thinking and are always aware that there’s a bigger context beyond the immediate focus of their organization. They have the intellectual flexibility to see the big picture while analyzing the details of a strategy. And they can formulate a vision that inspires all stakeholders.

Ultimately, by recognizing the interconnectivity of their business’s ecosystem, sustainable leaders drive ESG value by effectively managing risk and spotting long-term growth opportunities.

Stakeholder inclusion

While multi-level systems thinking enables leaders to understand the complex links across ecosystems, they won’t drive transformation without the ability to effectively respond to and engage stakeholders.

To do this, sustainable leaders don’t manage stakeholders, they include them. From employees and customers to governments, investors, and the communities in which they work, they actively look to understand a wide range of viewpoints. They make decisions and create value with all those stakeholders in mind. And they try to involve those stakeholders in actioning the decisions and sharing the benefits.

This takes high levels of empathy and authenticity. But when done right, it creates partnerships that increase the abilities and impact of organizations. By bringing in diverse perspectives, sustainable leaders improve their ability to answer problems and capture opportunities.

Disruptive innovation

The transformation needed to make real progress on sustainability won’t happen through incremental improvements. It requires exponential change and business model innovation.

Sustainable leaders dare to challenge traditional approaches and have the willingness to disrupt their businesses and industry. They seek the best available science to move beyond today’s best practice toward tomorrow’s required practice. They’re comfortable not having all the answers and confidently steer into the unknown. And they cut through bureaucracy to drive innovation that does away with the trade-off between profitability and sustainability. 

Long-term activation

Sustainable leaders go beyond a traditional long-term view. They set audacious goals and rigorously drive concerted action to achieve them. This requires a great deal of courage and resilience to stay the course in the face of setbacks and to make decisions that might be unpopular with short-term oriented stakeholders.

Of course, long-term activation isn’t about sacrificing short-term value. Our research on the board’s impact on long-term value, conducted with FCLTGlobal, found that directors who focused mostly on the long-term better understood short-term issues. They knew more about immediate operational risks, current products and services, and sales activities than those who focused on the short-term.

Are sustainable leadership competencies based on experience?

Although some of the competencies for sustainable leadership are innate, leaders get or enhance most through experience. In fact, three elements of a CEO’s experience correlate closely with organizational sustainability.

Functional background

A CEO’s career shapes their mindset. And a broad career builds a broad mindset. So, leaders with a breadth of functional experience, particularly in areas that deal with different stakeholder groups, are better prepared to deliver for people, planet, and profit.

International experience

Living and working in a foreign country exposes leaders to new cultures, systems, languages, institutional environments, and responsibilities. CEOs with such experience are more likely to be able to manage the complexities of organizational sustainability.

Tenure

Short stints in a variety of roles can show a CEO has the drive to deliver against ambitious short-term goals. But CEOs with longer tenures tend to have a greater ability and confidence to think about long-term missions, such as sustainability.

How to assess sustainable leadership skills

Historical recruitment practices don’t support sustainable leadership. As corporate sustainability becomes increasingly important to organizational strategy, companies should look for leaders with a natural sustainable mindset, the skills to drive action, and broad experiences.

Psychometric assessments can uncover the personality traits associated with sustainable leadership.

Sustainable leaders tend to be decisive and courageous but humble. They display genuine confidence without being arrogant and act with transparency by sharing when things aren’t going as planned and doing what they promise.

To assess such behaviors, we’ve developed Leadership Span™. It’s a psychometric analysis tool that explores two sets of personality traits: loud (disruptive, risk-taking, heroic, and galvanizing) and quiet (pragmatic, reluctant, vulnerable, and connecting).

Both sets are important.

Loud traits let executives push the boundaries of what’s possible. While quiet traits provide the restraint and reflection that stop otherwise hard-charging executives from driving themselves—and their companies—off a cliff.

Research has shown a strong connection between integrity and the presence of quiet traits. Yet companies often lose the quiet traits in the hiring process as they overlook the need to temper confident, self-assured, and risk-taking behavior. A proper psychometric assessment should reveal the presence of loud and quiet traits and illuminate an executive’s sustainable leadership competencies.

Extensive referencing will also be critical. By getting references from a wide selection of people who know a candidate, you can build a picture of how they embody sustainable leadership in the real world.

How to develop sustainable leaders

It’s easy to assume sustainable leaders have always had an innate passion for sustainability. Yet our research shows this isn’t always true. Sustainable leaders aren’t just born—they’re also made.

To develop sustainable leadership, it’s crucial to expose leaders to the experiences that will shape their actions.

Traditional wisdom says the best senior executives have unbeatable ability in a narrow area. And while deep knowledge is still necessary, broad experience is essential to sustainable leadership.

Encourage cross-functional moves

Moving across functions helps leaders become more open-minded and generate empathy for different perspectives across the organization. So, give leaders the opportunity to work across different functions.

Tips for building cross-functional experience:

• Ensure the function or line of business is notably different from the leader’s existing area.
• Pick areas that are more advanced in sustainability or set clear sustainability goals.
• Include goals around building relationships and diverse teams.

Create opportunities for international experience

The dynamics affecting a business—not least what stakeholders expect—often vary between regions. This helps leaders understand and question the assumptions held in their home region. International experience also offers exposure to leaders with different cultural backgrounds and ways of thinking.

Tips for building international experience:

• Ensure the region the leader moves to is significantly different from their home region (e.g., a European leader moving to Southeast Asia or Africa).
• Make sure they aren’t “ex-pat” coming in to teach the locals lessons from their region, but as someone coming in to learn from and collaborate with others.

Run secondments with partner organizations

Businesses rely on an ecosystem of suppliers, contractors, and other partners. Secondments to these organizations can give leaders a better understanding of the ecosystem, build their professional network, and expose them to diverse ways of working and thinking.

Tips for building experience through partnerships:

• Select partners that will be critical to your long-term strategy.
• Pick partners that will provide a very different vantage point.
• Choose partners with a strong focus on sustainability.

The need for change in the wider corporate context

For sustainable leaders to be effective, they need to work in a sustainable context. While this new breed of leader will shape and create this context, that will only be possible if the corporate world takes a profoundly different approach to leadership. It must focus on the common good rather than the financial rewards of a relatively small group of insiders.

Boards of directors and shareholders must be active supporters of corporate sustainability if CEOs and their management teams are to implement sustainable strategies successfully.

There are some encouraging signs as wider attitudes change. As Denise Morrison, Independent Director at Visa, told us: “If sustainability is a key part of your purpose and strategy, you don’t have time for leaders who won’t embrace it. I gave all my leaders a chance to step up and participate. Although I gave them all a chance, if they didn’t get it or support it, they didn’t belong at the company. Leaders need to walk their talk.”