Another year has come and gone, as has another COP meeting. What Did COP28 Really Accomplish was the title of an article that appeared in the New Yorker on Dec 13, 2023. Author Elizabeth Kolbert aptly states:
‘Three decades after agreeing to avoid “dangerous” warming, the nations of the world today acknowledged that this would involve “transitioning away from fossil fuels.” This can be found on page 5 of the final document that emerged from the latest round of climate negotiations—COP28—which just ended, in Dubai. Depending on how you look at things, the statement represents either a genuine breakthrough that will allow the globe to avert catastrophe or a point so obvious that what it really reveals is how far off track things have veered.’
Which of the two options (breakthrough or completely off track) do you think best represents the outcome of COP28? Al Gore minced no words. Referring to the original draft of the document, he tweeted, ‘COP28 is now on the verge of complete failure. The draft reads as if OPEC dictated it word for word.’
The key question: Despite trillions of dollars in ESG funds, increasing regulation, tax and compensation incentives, why are we not making enough meaningful progress on environmental or social sustainability?
The call for responsible behavior is growing louder by the day. Measurement and reporting requirements are getting more stringent, and governments are imposing stronger regulations to encourage businesses to act responsibly. Yet, why are we going in the wrong direction when it comes to existential challenges like climate change, socioeconomic inequality, and cyber vulnerability?
There are several reasons:
1. We are relying solely on incentives and regulation to drive responsible behavior. ‘The only way to get business leaders to behave is to link their compensation to ESG outcomes,’ said the chairman of the board of a well-known global company to me recently. ‘…We also need stringent regulation… There is no other way to get sustainability right,’ he added.
Based on the conventional wisdom of what gets incentivized and measured gets done, we’ve been using incentives, regulation, measurement, and reporting to drive responsible behavior all along. Yet, history has shown us time and time again that over reliance on carrot and stick approaches creates bad behavior. Enron showed the world how to commit one of the biggest corporate frauds without breaking any laws. In 2008, we saw how fouled-up incentive structures fueled predatory lending that caused the global financial crisis.
‘The definition of insanity is doing the same thing over and over again and expecting different results.’ – Albert Einstein
While incentives and regulations might prevent or minimize bad behavior, they do not generate enough good behavior. The latter is a function of one’s values. Sadly, amidst all the action to address today’s challenges, there is hardly any focus on values. We need a values-based revolution, and for that, we need to rethink education.
2. The world is becoming increasingly polarized. We need to collaborate across and within borders because only through genuine collaboration will we innovate enough to reverse climate change and socioeconomic inequality. Innovation can neither be legislated nor fuelled by extrinsic incentives alone. One of the biggest lessons the COVID-19 pandemic taught us was that ‘no one is safe until everyone is safe.’ The same is true for climate change and other existential challenges. Yet, instead of encouraging people to collaborate across race, religious, and geographic lines, most of today’s powerful political bosses are doing the opposite. We were barely out of the pandemic and some of them took the world into a dangerous war which is still ongoing. If one war was not enough, another one was started in the Middle East a few months ago.
‘An eye for an eye will make the whole world blind.’ – Mahatma Gandhi
Even if some of them are not busy starting (and funding) wars, they are dividing their people along race and religious lines to win elections. We know from history that God and Country are two of the biggest reasons for humans killing humans (aka murder). Yet so many political and religious bosses continue to flame hatred and violence in the name of religion and/or patriotism.
3. Leadership is dead. ‘It is impossible to make social or environmental impact without sacrificing some profits. We cannot make money and save the planet at the same time,’ said the same chairman quoted above. I tried but soon gave up arguing with him because he refused to take in a different point of view even for a minute. Sadly, he is not alone. Many business bosses see sustainability as a cost.
‘Other than in science and technology, mankind has made little progress.’ – Antonia Garcia Martinez
Real leaders in the 21st century see themselves as stewards of planet Earth and humanity and take ownership to create profitable solutions to today’s problems. However, this spirit (of stewardship) seems totally missing amongst a vast majority of business bosses. To succeed, they will need to upgrade their leadership to steward leadership, which is the genuine desire and persistence to create a collective better future for stakeholders, society, future generations, and the environment. Steward leaders build an organizational culture around four stewardship values: interdependence, long-term view, ownership mentality, and creative resilience. They also pursue a stewardship purpose to create collective prosperity beyond just stakeholders.
My new research, which culminated in the book Sustainable Sustainability: Why ESG Is Not Enough (Penguin Random House 2023), provides research-based evidence and case studies on the efficacy of steward leadership as a catalyst for long-term growth and prosperity. In studying the best champions of the (E)nvironment and (S)ociety in business, we found that rather than incentives or regulation, they were most motivated (to create positive impact) by a proactive and genuine intent to ‘do well by doing good.’ To save our planet and its people, we must educate and inspire many more to adopt steward leadership. Regulations and incentives alone will not be enough. Besides lessons from the best of the best, Sustainable Sustainability provides a step-by-step playbook for anyone interested in successfully marrying profit and purpose. The essence lies in three steps:
- Integrate the four stewardship values mentioned above into overall corporate values.
- Articulate and pursue a stewardship purpose – to create a collective better future.
- Use the values and purpose to guide and govern every decision, every day.
In conclusion, to save our planet and our people, we need a values-based revolution towards steward leadership. Steward leaders believe that creating a collective better future is in their own long-term interest. And if Vilfredo Pareto is still right, we only need 2 out of every 10 business bosses to adopt steward leadership. The 80/20 rule (aka the Pareto Principle) suggests that 20% of leaders will be enough to create the innovation-led impact we need. Once we have enough innovative solutions, regulation will hopefully force the remaining 80% to comply. But innovation is paramount, and that needs the creative resilience of steward leadership.
So, will YOU be within the 20% and choose steward leadership?
Posted 01 February 2024
